A lot of people go on with their lives not knowing how to manage money. As a result, they tend to bury themselves in debt and not save for their future.
As a parent, I like my kid to grow as a responsible person especially when it comes to handling money. A lot of people may argue that kids won’t understand the concept behind the proper handle of money but I would argue for the opposite.
I believe that teaching kids especially with money is a long and winding journey and there's no better time to start than when they are young.
- 20+ Best Apps That Pay Hundreds
- 10+ Best Survey Sites To Make Thousands A Year
- 25+ Survey Sites That Will Add $600/Month Or More
12 Ways To Teach Kids About Money
But the question remains, how do you teach kids about money? Here are simple ways you can do to show the value of money and how to manage money. These ways, though simple, can make a lifelong impact to your kids.
1. Teach kids about math, then, money
It’s always great to start teaching kids about money by teaching them mathematics, first. According to Shaun Cole, professor of finance at Harvard Business School, a lot of decisions about finance are easier if people are comfortable with numbers and making comparisons.
He further added that people tend to be more emotional when it comes to investing and spending money when they don’t have strong math skills.
It’s important for kids to understand math before they can understand money. If you tell your kids you only have $10 left out of your salary, then, they will ask questions how it’s possible when you’re making thousands in a month. It’s always a good practice to teach your kids the basics first, which happens to be mathematics in this case.
I have read the following books because my wife and I want to make sure our daughter learn the value of money at a very young age. I highly recommend you consider reading these books:
- Make Your Kid A Money Genius (Even If You're Not): A Parents’ Guide for Kids 3 to 23
- The Kids' Money Book: Earning, Saving, Spending, Investing, Donating
- Growing Money: A Complete Investing Guide for Kids
2. Buy what they need not what they want
Don't just buy whatever your kids want because doing that sends a signal that it's always fine to buy what they want. Eventually, they may have a hard time distinguishing the differences between necessities and wants.
If you feel that like you’re depriving them by only addressing their needs and not their wants, then, just think that you're disciplining both yourself and your kids for their own good and for their future.
Having said those, it's never bad to give them a few things here and there but it is always best if you make it clear what truly is a necessity and what is not.
3. Be a good model
As parents, you are considered to be your kids’ role models. They see and know what is right by looking at you and following what you say and do. It’s the same rule that applies to teaching kids about managing money.
If you’re teaching your kids how to save but you spend too much money on various things like clothes, cars, gadgets, and others, then, you are sending a mix signal to your kids.
Do not fall under the category of “Do as I say, not as I do”. It is by actions not words that they learn fast about how to handle money early on in their lives. Just remember that whatever you do in life as parents will have a great impact on your kids’ future.
4. Don’t tell kids you don’t have money
It’s always best to tell your kids the truth. Don’t tell them that you don’t have money, when in fact, you do have. Instead of saying that, tell your kids that rather than buying unnecessary products you rather buy food for the family, save money towards college education, and so on.
Kids will ask questions after the other until they get the answers they need. Tell them the reasons that you do these things. You don’t need to lie because you want to teach your kids about money.
5. Bring kids to the grocery
Allow kids to do grocery shopping. Provide them a grocery list and a budget to follow. Your children may be shocked at first but that’s perfectly fine. You are there to guide them through the process and explain what they are doing and the value of what they are doing. Eventually, they’ll become better at what they do.
By allowing kids to shop for grocery, not only do you give them first-hand experience in shopping and budgeting but you also teach them how to be responsible early on in their lives.
6. Let them work on simple chores
You don’t have to force kids to work so you can teach them the idea that money doesn’t grow on trees. You can always find something simple for them to do and, in exchange, you can give them rewards in the form of cash and/or gifts.
You can make them responsible for working on simple chores like watering the plants, cleaning the tableafter eating, and things like those.
Tell your kids that you are giving money because they did accomplish the tasks. In simple terms, there should be a purpose or value for rewarding your children. This doesn’t mean that you need to make them accomplish the tasks first before giving them money.
The point is they need to understand how to value the money and giving them simple chores to work on is a good way of imparting that thought.
7. Introduce your kids to compounding interest
Always start with the basics. In this case, start teaching your kids with how interest works and the best place to show just that is through banks. When you go to the bank, bring your kids with you.
Tell them how the bank works. Introduce the bank as a place where they can put their money safely and where they can grow their money through interest. Once they have a grasp of how the compounding interest works, then, you can introduce them to investing.
8. Talk about money
Kids always ask and they ask almost about anything and everything under the sun. It is a good idea to talk to kids about money even at very young age.
Let them know that money is earned and that’s one reason that you work. Tell them, in simple language, that you earn money and you pay bills at the same time and the leftover is used for savings, college education, among others.
It’s always a great practice to involve kids in money talk even when such discussion involves a small amount of money. Though they’re kids, they will appreciate that their advice and opinions are considered and valued.
9. Teach kids about money over time
You may be so eager to teach your kids about money and that’s good. But teach them over time and don’t get it done in one sitting. Kids can only take so much and they can only learn so much in a given time.
According to John Lynch, Director for the Center for Research on Consumer Financial Decision Making at the University of Colorado, Boulder, the problem with teaching your kids about money or finance is that financial education decays over time. Mr. Lynch and two other professors found that the effects of financial instruction done only once wear off fast.
This study, in my interpretation, means that it’s almost useless to teach kids about money when it’s done once. I believe that constant teaching about money coupled with continuous reinforcement will help kids retain the lessons on the value of and how to manage money.
10. Give them allowance and allow them to spend
Another way to teach kids about money is by giving them allowance. When all the lessons on money, spending, and other topics related to money have already been taught, practice is next in the action list. Practice makes perfect.
Give your children allowance and allow them to make spending decisions on their own. It is through this process that they will learn the dos and don’ts of spending.
Before they spend, you can talk to them about pros and cons of spending and how to best spend their money. You can tell them to do research first before buying so they know what they’re really getting when they buy the products.
11. Teach kids how to evaluate advertising
It is inevitable that kids will see advertisements. These ads are so good at targeting the desires of the kids that these kids tend to want products based on what they see and hear from the ads.
According to the USNews, earlier research found that children lack the ability to understand marketing messages until they are teenagers and that they see these ads as truths.
It is best to teach your kids on how to evaluate the value of such ads or products. It is in your and your kids’ best interest to help them distinguish the needs from the wants early on. When they learn the differences between the needs and wants, they will be able to filter which ads or valuable or not.
12. Teach kids how to record of their saving and spending activities
One of the ways to teach kids about money is by teaching them to make records on what they save and how they spend the money is a powerful way to help them understand about money management. These records can be a bunch of jars with different labels (e.g. grocery, toys, and food) or something else.
Encourage them to place all their receipts in the jars. As they grow, you can show them other ways of records keeping like MS Excel, filing folders, etc.
Instilling this practice while they are young means that they can become familiar, little by little, with the purpose and the end results of tracking their saving and spending activities. Remember that the main purpose of teaching the children about records keeping is to allow them to understand where the money goes. This lesson can be handy when it comes to budgeting, investing, and debt management later in their lives.
Teaching kids about money is a lifelong process. Any steps, whether small or big, can make a difference in how your kids will treat and manage money when they are grown. There really isn’t a magic number or age when parents should teach kids about money.
It’s all up to the parents.
For me, the earlier the kids are involved, the better they are positioned in understanding the ins and outs of money and all the issues and matters attached to it. It never hurts to teach kids about money.
How do you teach your kids about money? Do you have other ways to make sure you are raising a financially responsible person.