10 Ways to Teach Your Children About Money
My colleague Brian and his wife were expecting their first child. He told me they were buying a $3000 stroller from New Zealand for the baby they were expecting in 6 months.
Brian was just a rookie, and I thought spending three thousand dollars on a stroller plus shipping and handling from across the globe was a bit over the top! It seemed pricey for a middle-income couple.
Children learn from what they see. Our children pick up our attitudes regarding money. You are the first person from whom they will learn life's lessons regarding work, self-care, and a healthy lifestyle. Are you modeling a healthy relationship with money for your children?
Here are some questions for reflection:
Are you living paycheck to paycheck or stressed by your debt?
Do you often say, "we can't afford it?”
Can you talk openly with your partner about your finances?
Do you have a household budget?
Are there conflicts in your home around the issue of money?
Do you support each other's dreams?
Have you prepared a written financial plan for achieving your goals?
Is your Will up to date? Does it have guardianship provisions for your children should you die?
Are you insured in the event of an unexpected loss of income due to death, disability, or illness?
Partnership is Key
Conflicts around the issue of money are cited as one of the leading causes of divorce. If you have a significant other, it is vital to review the questions together. It should give you a good indication of the temperature of the overall health of your household finances.
We are almost at the end of 2022, and the total household debt in the US reached a record of over $16.2 trillion. A legacy we could leave the next generation would be a healthier relationship with money. Here are seven ideas for teaching children how to manage money.
Here are ten ways to teach your children about money.
1. How to Keep Track of Where it's Going
Download an app such as digit to keep track of your income and expenses. Depending on how your children are, they may wish to download a similar app for themselves.
2. Open a Bank Account in Their Name
All banks have savings accounts for minors. Depending on the financial institution, you must be a guardian or trustee on the account. I still remember when I had my first bank book as a child. I also remember the feeling of seeing my money grow.
3. Become Aware of How You Speak About Money in Your Home
Your children will inherit your beliefs about money and wealth. What do you say about money in your home? That "there is never enough.?" or "money doesn't grow on trees?" What are some of the remarks you make regarding rich people? That they are somehow dishonest and entitled?
Question your beliefs. What beliefs would you like your children to have about money? How would you feel if your children became extremely wealthy as adults? Expressing limiting beliefs about money can negatively affect your children's relationship with money.
4. Simple Budgeting
Label three jars; spending, saving, and sharing. If they receive allowances or money from a side hustle like babysitting or a summer job like mowing lawns, teach them how to prioritize their spending. Budgeting is a great way to learn math besides learning about money. Even young kids can manage simple math.
5. Saying must"yes to something may mean saying “no” to something else
If they ask for a new gadget like an iPhone, discuss what they may need to say '"no' to afford the new device. Your income may be finite; you choose what you will spend". What are they willing to forgo to get what they want? An upgrade to a bike is a great idea, but it may mean sacrificing something else. Discuss the choices they make. It helps them create tools for increasing self-awareness.
6. Teach Your Children That Money Grows
As their money jars fill up, take them to deposit it into their bank account. It can be very empowering for them to see money accumulate over time when saved.
An online financial calculator shows them the compounding effects of money saved.
Even with a low-interest rate on a savings account, over time, it does add up if you do not spend it! " reverse works the same — revolving debt that is left unpaid also grows.
Most credit card statements now show the impact on your balance if you do not pay off what is owed monthly. Show your teenager what happens when the balance due on revolving debt is left unpaid.
7. Get them involved in comparison shopping
If they want a new bike, have them compare prices online. And have them compare prices on expenses for the house. They are part of the family and would appreciate helping you manage the household expenses.
8. Delayed gratification produces success
A famous longitudinal study done at Stanford University in 1972 by psychology professor Walter Mischel found that teenagers who were able to delay gratification when they were preschoolers had better SAT scores when it came time for College.
Teach children patience by having them wait or save up for what they want. We tend to value things that require more effort to acquire. Allow them to put effort into acquiring things — through time or work.
9. Let your children discover the joy that comes from sharing
Social Psychologist Elizabeth Dunn, a professor at the University of British Columbia and co-author of Happy Money: The Science of Happier Spending, found that people's level of happiness is higher when they spend relatively more on others than on themselves. So give your children as many opportunities to experience the joy of sharing what they have.
10. Talk about things money cannot buy
Have them list the many things money cannot buy, love, friendship, family, sunshine, and hugs. Cultivate in them an appreciation for all the things money cannot buy. The joy from these last much longer than the satisfaction one gets from purchasing items. Studies show that experiences producing these positive emotions bring more happiness than ever.
Money should be fun! Find ways you can make the subject of personal finance light-hearted. Create a family bucket list. Probe a little. Be curious about your kids' choices regarding what they want to see on the family bucket list. Expand their vocabulary around positive emotions and memorable experiences.
You may want to learn more about managing your money so you can help your children adopt healthy financial habits. Signing up for an online course on personal finance may help you feel more confident about managing your household finances.
When we think about leaving a legacy for our children, we often think about the assets we want to accumulate, like the family home, the family cottage, and our investment portfolio. And the values we'd like to teach them, Such as hard work, integrity, and kindness.
But let's also empower them with sound financial planning principles around managing money. Set an example for your children. Pay off your revolving debt. Save regularly. Set aside a rainy day fund.
Put your financial house in order. They'll probably thank you for it when they grow up.