If you have kids, you will be thinking about how to impart financial wisdom onto them.
A study by the University of Cambridge found that money habits in children are formed by the time they’re 7 years old.
Here are 6 smart ways to teach your kids about money.
It’s never too early to start!
This article was written by a Financial Horse Contributor.
1. Set a good example
Kids don’t listen to what you say, they follow what you do.
Set a good example for your kids by cultivating a good relationship with money.
As soon as your children can count, talk to them about money.
MoneySense suggests to teach basic money skills through simple everyday activities.
Show and tell them what money is and what it can do.
Bring them to the supermarket, show them prices and explain the exchange at the cashier.
Show them that money is a tool – a neutral tool that is neither good nor bad.
If you can avoid fighting about money in front of your kids, this will also help to build a healthy relationship with money.
2. Make saving a habit
One tip from experts is to use a clear jar.
So kids can see the money and see it grow.
This will motivate them to keep saving.
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3. Teach them contentment
With social media these days, young teens nowadays are exposed to a lot of excess consumerism.
They may want to own designer goods or compare themselves with others in a negative way.
This trend has become very worrying to parents.
This is where you should also explain important values that you hold about money.
4. Give them responsibility
The best way to teach kids about money is to let them have ownership.
If you micro-manage their finances for them, they will never learn.
Give them responsibility by letting them have their own bank account.
Give them allowance (by month, instead of day/week), so they learn how to budget on their own.
Experts say that giving kids allowance, or letting them earn money for chores, is an opportunity to teach them financial literacy.
“It’s not that the allowance that a kid gets when they’re 11 is going to be the dollars that make them a millionaire,” says Clark D. Randall, a certified financial planner and the founder of Financial Enlightenment in Dallas.
“But the habits that they form from managing it will allow them to be financially successful in life.”
5. Show them that money can grow
Expose kids to the idea of compounding from young.
That their savings can grow in the bank account, and that money can grow.
When they are older, explain to them the concept of investing.
How does interest work? What is a share? Why do companies pay dividends?
Kids are sponges for knowledge. If you are willing to teach, they are willing to learn.
6. Give back
While saving and growing money is important, it is also good to show your kids that money can be used to help others.
Sharing is caring.
You could help them save towards a goal to donate to a cause they choose.
You can create spending, saving and giving jars, or set up a special savings account for them (and you could also match the savings for donations).
Giving back allows them to think and care for others.
