Teaching kids about money is crucial in helping them know the usefulness cash brings.
What is the importance of teaching kids about money? What should my child know about money?
If you are looking for answers to these questions, then keep reading.
Money decisions are a big part of everyday life. Individuals are faced with making choices bordering on savings, spending and investments.
As a parent, there is a need to prepare children for the myriad of choices they would be making in relation to money all through their lifetime.
This is why teaching children about money is important. According to a T. Rowe Price survey, carried out in the United States, 71% of parents are reluctant to talk to their kids about money.
If taught strong financial habits early, your children will be prepared to conquer common challenges as they grow older.
Nicole Decursy once narrated what his 3-year-old son told him when he couldn’t buy him a toy he wanted. The son said, “Just go to the bank and they’ll give you money.”
This explains the need for children to have a clear understanding of money–what it means and how to get it.
Some studies that support educating youngsters about cash have proved that as early as the age of 3, children can grasp basic money concepts.
By the time they get older, they have formed the bulk of their money habits.
Therefore, as parents we have to understand that basic money management is a vital life skill.
An age-by-age guide to teaching children about money
When educating kids about money, or related topics in parenting, only age appropriate subjects should be taught. For instance, toddlers or preschoolers may not understand investments and savings. However, such concepts can be taught to teenagers and adolescents.
Teaching kids about money; how it applies
Ages 2-5: At this stage, children should be able to carry out basic currency exchange. They may not know the exact value of certain currencies but being able to identify the different currency denominations is a step in the right direction.
Ages 6-9: Children at this stage should be introduced to the concept of value. They should be able to make simple calculations and determine the right amount of change to be gotten after a transaction. Introduction of board games such as monopoly may go a long way to improve this ability.
Ages 10-13: It is at this stage parents should introduce the concept of an allowance to their children. Be it weekly or monthly, children should have a fixed amount of “income”. This will enable them plan their spending around that particular amount.
When teaching kids about money, you should encourage them to start businesses in school and at home. An example is the student enterprise development exercise and the GreenyG Mini Mart which was recently set up at the Lekki campus of Greensprings School.
Students “set-up” businesses from the scratch – generate ideas, design product and market it within the school premises. The profit made is usually re-invested in the business.
Ages 14-17: At this stage, children can now be introduced to the real money market, investments and trading. Some children friendly banking and investment schemes have sprung up and are very useful for teaching real life money management skills.
After you may have set the right foundation using the major milestones developed above, you can be assured that your children will make informed money decisions in the long run.
Here are 10 most important things when it comes to teaching kids about money
1. Money doesn’t grow on trees: When teaching kids about money, they need to understand that money is earned and it is a finite resource. It is not unusual to find youngsters have a general belief like that of Nicole’s son.
2. Live within your means: When it comes to money, you need to make your children understand that sometimes they may not have all they want. Some things can be bought with a little planning and goal setting but some are over the top and they should be made to understand this.
3. When it comes to business, you don’t get what you deserve you get what you negotiate: The saying also applies to other area. You can only earn as much as you are able to negotiate and this is a fact that children need to understand and constantly practice.
4. Budgeting does not have a substitute: When teaching your kids about money, let them know that having no budget means that there is no spending plan and this translates to having your money spent on things which do not matter.
5. You don’t have to get all you want NOW!: Many adults make costly money mistakes by trying to get everything they desire whenever they wish. This is often times the major cause of debt and bad credit history. You need to teach your children the principle of delayed gratification.
6. Giving is part of living: Children should be encouraged to give to charity regularly. In actual fact, donating to charity should be seen as more than a financial exercise. Teachings kids about money will make them understand that it can be used to make the world a better place.
7. There is wisdom in investing: Using money to get more cash sounds like a good idea to everyone even children. They should be taught the basic principles of investment and encouraged to do so on a regular basis.
As an important part of teaching children about money, parents should do well to provide enough guidance and if possible get them registered with a professional financial adviser.
8. Keep track of your spending: When teaching kids about money, children might ask for a reason why they need a budget. Well, the answer is simple; it helps to keep track of spending and it reveals the progress made in relation to already set financial goals.
9. Saving is important: The importance of saving cannot be over-emphasized. It can come in handy in unforeseen emergencies. Teaching children about money encourages them to set goals. The thrill a child gets from purchasing that toy he/she dreamt of, using the money he/she saved up, cannot be measured.
10. Money is not everything: As unsettling as this may sound, money is not everything. Encourage your children to live a balanced life. Educating your child about cash spending should not substitute what it can buy over other important things of life that matter.
In summary, teaching kids about money is one thing every parent must do at different milestones of their child’s developmental journey.