October 9, 2020
By Rahul Iyer
Schools focus on the ‘book smarts’ kids need but often overlook the importance of teaching kids about money. They leave that up to the parents. It’s a big job to take on, but it’s also one of the most important lessons you can teach your children.
Children are never too young to learn about money. Tailor your lessons to their age, teaching them what they can understand and always up-leveling your ‘lessons’ as they age.
Don’t make money a secret or an ‘adult topic.’ Let kids hear about money too. Teach your kids the value of a dollar. Help them learn how money works.
A good visual, especially for young kids is to set up three clear glass jars, one each for saving, giving, and spending.
Each time your child earns or receives money (including gifts), split the money into thirds, and let him/her see the money add up in each jar. Only let him/her spend the money in the ‘spend’ jar, while the savings grow and the giving he/she can decide who to give to.
No matter how much money stacks up in your child’s ‘spend’ account, don’t let him/her fall for those impulse buys – it’s a bad habit.
If it’s a large purchase (for children this means anything over $5 or $10), encourage him/her to wait 24 – 48 hours. If they still want it and/or talk about it, then you can talk about how they’ll pay for it. If they don’t bring it, you just saved your child and yourself money. This is a skill they can take within them into adulthood.
If you have a habit of swiping plastic (even if it’s a debit card), your children see this and think it’s okay to charge. When they hit 18-years old, they’ll get bombarded with credit card offers and think it’s okay to take them.
Start teaching them early on that credit cards aren’t the answer and that credit card debt is dangerous. Talk about credit card interest, how it accrues, and how making only minimum payments makes a purchase cost much more than its original cost.
As soon as your child understands basic math, you can teach him/her about budgeting. As your child gets into the teen years and has expenses, like car insurance, gas, and spending money to go out with friends, help him/her learn how to budget.
Keep it simple, but start the habit now so when he/she is out on their own, budgeting will feel like a normal part of life and not something else they have to learn as they enter adulthood.
You can’t talk about money too much with your children. Giving them the knowledge needed to stay debt free, in control of his/her money, and how to save are the best lessons you can provide a child as they enter the world as adults.