Being a parent can be very demanding. You are obligated to carry out a lot of responsibilities, ensuring that your kids are sound academically, emotionally, and health-wise. But one of the parental duties that is often overlooked is how to teach kids about money.
This is not a topic we discuss because many folks don’t think it’s important. Notwithstanding, teaching your kids about money is one of the best ways to groom them into successful and reasonable adults.
Mind you, this doesn’t mean you have to formally sit your kids in a classroom and start offering financial lessons. Instead, it’s a passive learning process that your kids are supposed to go through as they grow up. Basically, you should make financial learning a lifestyle for your kids. That’s exactly what I mean.
In this post, I’ll be sharing some of the easy ways to teach kids about money without having to appear as a financial expert in front of your children.
Is It Good And Necessary To Teach Children About Money?
Teaching kids about money is as important as teaching basic table manners and instilling good character traits in them. At some point, your kids will have to handle money on their own. They need to be prepared for that period of time in life.
What Are Fun Ways To Teach Kids About Money?
One of the fun ways to teach children about money is to watch a documentary on finance. This way, it feels like everyone is getting entertained by a movie. However, financial lessons are being learned.
The Importance Of Teaching Kids About Money
Before we delve into the methods for how to teach kids about money, it’s important you know why you have to do this. It will make you more intentional. Here are a few reasons why your children should learn about money as they grow up:
1. Teaching Kids About Money Helps Them Learn How To Save
I used to save money as a kid. Although I wasn’t taught by my own parents, I naturally developed a liking for stashing cash somewhere and then using it for future expenses. Eventually, I realized I had built a very good financial habit (saving money). If you want your kids to be comfortable with the idea of saving a portion of their earnings, you have to start teaching them now.
Show your kids how important it is to be financially prepared for the future. Encourage them to save out of the pocket money they get from you as a parent.
2. Teaching Kids About Money Helps Them To Be Independent
Having a sense of Independence is one of the key qualities that young people need to succeed in various areas of life. Your kids need to believe that they can handle certain situations on their own without getting anyone’s help. One of the ways to instill this trait in your children is by teaching them about money.
When your kids know how to handle money using the lessons you’ve taught them, they gradually develop self-confidence and learn to become more independent.
3. Teaching Kids About Money Helps Them To Be Prepared For Adulthood
Another reason you must know how to teach kids about money is to prepare them for the future. Kids will never remain kids forever. In no time, your children will grow up into mature adults, especially as they move into college. Would you want them to struggle financially? I guess you’re screaming a loud ‘NO’.
Teaching the value of money to your kids is an amazing way to prepare them for what’s coming. Before and when they become adults, they should know how to manage their financial resources, grow their own income, and be financially independent. As a parent, this is one of the best things you can help your kids achieve.
15 Ways To Teach Kids About Money
Providing financial education for your children is essential. There are so many things to gain when your kids understand the principles of money and how to be financially stable. Here are 15 actionable tips on how to teach kids about money:
1. Be An Example
Some years ago, I was invited to speak at a children’s event. Before I began my speech, I asked a question – “who’s your role model”. It was interesting to see that some of the kids said their parents (mom or dad) were their role models. This suggests that kids typically look after you as a parent and pick up some of your obvious habits.
This is why if you must know how to teach your child about money, you need to start by setting a good example. Your lifestyle should be a reflection of good financial habits. With time, your children will begin to emulate you.
2. Show Them The Cost Of Things
Some kids will never know how much a gallon of milk costs until they are old enough to afford one. This is not ideal. As a parent, you need to often inform your kids that things cost money. From the groceries you buy to the utilities you pay for, make sure your kids know how much leaves your checking account. This will have an impact on their mindset, as they would get to understand the importance of having and spending money.
3. Give Them A Clear Jar To Save
This is one of the common strategies for teaching kids about money. Get a jar and give it to your kids for saving money. Don’t use a piggy bank since it lacks the visual effect that kids need to stay encouraged. Because a jar is transparent, kids can easily see how much they have saved, and this could be the self-motivation they need to keep saving.
If you give your kids pocket money occasionally, I suggest you employ this simple strategy. Encourage them to save in a clear jar.
4. Explain Opportunity Cost
Opportunity cost is one of the most vital lessons kids need to learn about money. For example, if buying a video game will prevent your kid from getting a pair of new shoes, then the game should not be purchased until there is enough money for it. Even as adults, we would make costly financial mistakes if we neglect this.
When you teach your children this principle repeatedly, they won’t always be in a hurry to make a purchase. They will be encouraged to make rational decisions when buying anything.
Ways To Teach Kids About Money
5. Don’t Give Allowances, Give Commissions
Giving your kids allowances isn’t a bad thing. But if you want to be intentional about teaching your kids financial lessons, give them commissions, not allowances. They can get a few bucks for doing chores around the house. When you do this consistently, your kids will understand that money is earned and not given to you on a platter of gold.
From the commissions kids earn, they can start learning how to save money on their own.
6. Avoid Impulse Buying
Kids want you to buy everything. As long as they think the item is cool, they don’t mind if you pull out your credit card and pay for it immediately. That’s impulse buying, and it remains one of the biggest money mistakes you must avoid.
Since you want to know how to teach your child the value of money, don’t let them make this mistake. Always remind them of the importance of curbing one’s spending habits. “If you spend all the money you have now, how would you over your expenses tomorrow?” That’s the question you throw at them.
7. Show Them The Importance Of Giving
One of the overlooked tips for teaching kids about money is giving. You may wonder how giving money can help you thrive financially, but it actually does.
Giving money to a charity, church, or anyone in need has a way of reminding you that you can be kind to humanity if you’re financially successful. When your kids start making their own money, this is a very important lesson to teach them.
8. Teach Contentment
Contentment is one of the good money habits to teach your kids. It’s important that children see that what they have is enough. This way, they won’t be compelled to live like someone just because the person seems to have a better life. Besides, when kids are contented with their financial resources, it is easier for them to learn frugality. They can learn to ignore unnecessary expenses and save their money. If you are the frugal type, you should know how true this is.
Tips For Teaching Kids About Money
9. Let Them Own A Bank Account
When your kid becomes a teenager, give them the responsibility of a bank account. It’s one of the common strategies on how to teach kids about money.
As long as you have been following the tips mentioned above, you can set up a simple bank account for your teenage son or daughter. This is you telling your kids that they are now in full control of their finances. It’s a good way to step up their money management game.
Also, I recommend this if your kid is earning money from an after-school job.
10. Encourage Them To Save For College
I know you’ve probably been preparing to fund your children’s college education. Nevertheless, one of the top tips on how to teach your kids good money habits is by encouraging them to save for college. Are your kids interested in working summer jobs? Do they want to start a side business? If they want to, it’s your responsibility to fully support and motivate them.
When your kids earn enough money to contribute toward their education, it’s not just a great feeling. It’s a first-hand experience of how to look after themselves as adults.
11. Teach Them To Avoid Student Loans
If you are unable to pay for your children’s college, they may be compelled to apply for student loans. Loans may seem like a very easy solution to get a college degree when you can’t afford it. However, these loans can drastically affect one’s financial life.
I remember meeting a lady who spent 2 decades paying off student loans. It was heartbreaking to see how her finances were held down by the debt she had to pay.
Instead of getting student loans, encourage your kids to consider other options such as attending a community college, an in-state university, or working part-time while in school.
12. Teach Them To Avoid Credit Cards
I stopped using credit cards a very long time ago, and I’ve never been happier. Teaching your children the danger of credit cards is important. When they turn 18, they are going to receive a lot of credit card offers. They must learn to say no because these offers are debt traps in disguise.
Millions of Americans are already victims of credit cards, and I’m pretty sure you don’t want your kids to be among them. Instead of using credit, it’s best to increase one’s earnings by working multiple jobs or starting a side business. Cutting down on one’s expenses is also important.
How To Teach Your Kids About Money
13. Show Them How To Budget
I’ve been budgeting money for as long as I can remember. I started when I was a teenager, and I haven’t regretted it. To know how to teach your kids about money, budgeting is one area you must look at. Your kids should learn how to use a budget to manage their income and organize their expenses. This will prevent common mistakes like impulse buying or overspending.
More importantly, your kids would probably think building a budget is tedious. This is why you should recommend a good budgeting app that simplifies the who process. Budget apps like EveryDollar and You Need A Budget (YNAB) are very useful.
14. Help Them Understand The Wonders Of Compound Interest
Knowing how to teach kids about money would also require you to show them the benefits of investments when they are old enough. This is where you explain how compound interests work. The fact that you can significantly increase your money by stashing it in an investment account should be a fascinating idea for kids.
They don’t need to invest as soon as you tell them. But since they have the knowledge, they might make the right decision toward an investment when they are financially ready.
15. Share Money-Making Ideas With Them
Aside from getting a summer job, there are so many ways kids can make money today. Especially due to the numerous opportunities that are being provided by the internet, your kid would be making a significant amount of money weekly or monthly from the comfort of their home.
Money-making opportunities like affiliate marketing, YouTube creation, live streaming, content creation, and a lot more can help your children make cool dollars consistently. However, it’s your responsibility to open their eyes to these opportunities. You can’t claim to know how to teach kids about money without showing them some of the legitimate money-making methods out there.
Final Thoughts On How To Teach Kids About Money
Figuring out how to teach kids about money may not be difficult. The only challenging aspect is making sure that your children actually receive these lessons from you consistently. This is why it is important to encourage your kids by giving them the chance to make their own money.
These days, children can start a side business, especially online, and make as much money as adults do.
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