Did you know children form most of their attitudes about money before the age of seven? It’s true. Which means if you’re a new parent, your children are likely watching you and adopting many of your own attitudes surrounding greenbacks — whether you realize it or not.
What lessons do you hope to pass on to your children regarding the value of a dollar? And how can you instill a healthy respect for cash in your children? Here are seven tips to get you started on teaching your little ones financial literacy:
Speak Openly About Money. If you reserve money talks for after the children are tucked into bed, you create the attitude that discussing cash is taboo. This proves far from healthy — after all, you want your kids to feel empowered to ask for the financial resources they need to succeed in life. Take the money convo out of the parents’ bedroom and back to the dinner table. Going grocery shopping? Take your children along and compare the prices of various meals to serve for supper. Begin teaching opportunity cost by giving children a small sum such as $5 to spend on whatever they like. Include the caveat that once they spend the money, they cannot purchase anything else.
Bring Back the Piggy Bank. Your grandparents knew what they were doing — the good, old-fashioned piggy bank can teach children much about savings and money. To maximize learning, choose a clear piggy bank which allows children to see how their money adds up. Today’s models even come with phone apps which allow children to keep track of how much they’ve saved.
Use Allowance as a Teaching Tool. If you’re in the habit of giving the little ones a weekly allowance, don’t overlook the teachable moments inherent in doing so. Anyone can dole out dollars to the kiddos, but doing so in a way that teaches solid money management leaves children better able to make sound financial decisions later in life. Also, consider assigning a dollar amount to each chore commission-style instead of giving kids money with no strings attached. This teaches children that hard work results in rewards. Plus, many children are more anxious to help out with household chores when there’s a monetary incentive involved in doing so. This may even help eliminate arguments over whether or not to make the bed if failure to do so costs Junior a buck or two.
Set up a Savings Account. The best way to teach children how interest compounds when they save money is to help them open a savings account and let them manage it themselves. All children can benefit from saving early, and doing so may help them with anything from funding their college education to buying their first home. Go a step further by setting up different savings accounts for various goals. For example, one account can hold an emergency fund while another is devoted to school savings.
Play an Investing Game. Savings accounts are crucial for liquid cash reserves; however, savvy parents want to teach their children how to invest as well. Learn about how to play the Stock Market Game and practice playing with your children. You can set up investment accounts for each child, or you can keep the game entirely fictitious — or do a combination of both!
Get Them Their Own Plastic. Help your children learn how to use credit responsibly by getting them their own debit card linked to their bank account or even their own credit card. Once your older child has their own credit card, don’t shy away from teaching them tough lessons. Yes, it may prove difficult for your youngster to learn how to pay off a card, but it’s best they learn the lesson young rather than waiting until they reach adulthood.
Teach Them About Charitable Giving. Most children have an inherent sense of charity which sadly gets lost as they age. Teach children about charitable giving while they’re still young. One thing you can do is teach by example — select several causes you support and allow your children to help you decide which one to donate to. Teach positive stewardship as well by encouraging your kids to get involved in community charitable efforts. Encourage them to participate in walks and runs to raise money for causes and diseases. And don’t just talk the talk — get involved with these efforts yourself as well.
Raising Financially Literate Kids
Financial literacy begins at an early age. From the moment your children understand spoken language, they begin forming their future money attitudes and habits. Make sure your children learn solid fiscal management by following the tips above. Your children’s future selves will thank you!
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