No matter how old your kids are, they’re never too young to be introduced to healthy financial habits. According to this report, kids as young as 3 years old can grasp financial concepts, and most money habits are formed by the time kids are 7 years old.
Introducing your kids to the financial world at an early age is one of the best things you can do as a parent, for yourself and for your kids. Your kids will thank you later as they’ll have grown up learning and understanding what it means to be financially healthy, and teaching them early will allow you to build upon and reinforce habits over the years, instead of all at once when it’s time for their first job.
So, you know it’s important to talk to your kids about money, but where do you start?
Here are a few things you can do:
Today’s society is all about the “have it now” mentality. When you want a good meal, you go out to a nice restaurant or pick up takeout. You need a new dress, you hop online and have it shipped to you in days without ever having to go to a store. We’ve all gotten used to this, but don’t let your kids grow up thinking this is the way it’s supposed to be. Teach them to wait for the things they really want, and it’ll be easier for them to wait later for those big purchases, like a home or a new car. Take them to the store with you, but show them that they don’t get to leave with a new toy each time. If they’ve had their eye on something for a while, teach them to wait until their birthday or Christmas to get it -- or, better yet, teach them to save for it (read on).
Show them what it means to save.
If you don’t already, begin giving your kids an allowance. Make sure they’re working for it, even if they’re young. Teach them the benefits of saving for long-term goals. To illustrate this concept to them, present them with 3 different toy options: one worth the price of one allowance, the second worth the price of a few allowances combined, and the third worth the price of many allowances (a few months’ worth is a great place to start). Each time you give them their allowance, show them the toys again, and explain how much money they have and how much longer it would take to get to the best one. Let them decide which one they want. Even if they choose the smaller toy, they’ll likely come to regret it later.
Let them learn from their mistakes.
Like we just said, allow your child to pick the smaller toy if that’s what they really want, and they’ll learn the importance of saving from their own mistake. Similarly, if your child decides they want to spend their hard-earned money on something you know they’ll regret later, allow them to. This will help them see the value of money and understand how quickly money can be spent on things that simply aren’t satisfying. Take it a step further and give them the option to earn more money. Some chores may be required, but add a few optional chores to their list. Explain how much each chore is worth, and allow them to decide whether or not to complete them for more money. This will help them understand the direct correlation between hard work and reward, and it’ll make getting a job a smooth process down the road.
Let them be part of it.
Don’t just give your kids money; let them see what it means to have money. Take them to the bank to deposit their money. Show them that you make daily decisions similar to those that they make. Explain that you choose to go to work so you can make enough money to buy the things you want and need. Show them what you’re saving up for. Show them money in action. This will help make this seem like a much real concept to them, rather than an abstract concept they can’t fully grasp.
This is ultimately the most important thing you can do for your kids. If you are modeling unhealthy financial habits, you can't realistically expect your kids to master their own finances. Before you begin teaching your kids, make sure your own financial status is as good as it can be. If you need some help, try our financial cleanse to get you and your family where you need to be financially.