The Right Time To Start
As soon as your child starts asking for things, the first lesson they must learn is that those things cost money, and money has value. When you spend that money, it is forever gone. Would you be surprised by the fact that most children understand by age three that coins and bills can be exchanged for things, like say that piece of candy or toy new toy that they want? Then by the age of six or seven they can even better grasp the money concepts of earning, and saving to go along with that spending instinct! Teaching kids about money is a process that happens over time. Starting at an early age with simpler concepts and working up to the more complex ones as their age and cognitive ability will allow. The skills lies in learning (or teaching) the value of saving, and of spending conscientiously and understanding the difference between wants- the just for fun stuff, and needs- the necessary expenditures. Allowance Basics A good way to help your child learn how to handle money on their own is by giving them an allowance. Somewhere around the ages of 5-7 have a conversation with your children concerning money, include your own values and beliefs concerning money. Set up a fixed allowance amount and plan with your child how that money will be allocated. For example, a common measure is $1 per year of age, thus $7 a week for a 7 year old, $14 a week for a 14 year old. You can then discuss managing the money by designating to certain things. For example, 40% toward spending, 40% toward short-term saving (new video game, bike, toy), and 20% toward long-term savings (when older: cell phone & bill, car, college). You could also lessen one or more of these and add in something like a percentage for charity or a giving back project of some kind. Lastly be sure to define what they are expected to pay/save for. You pay the mortgage, electric, groceries etc, but they pay for special snacks they want, toys, etc. In this post I am referring to younger children. Finding Opportunities to Teach Taking your children to the grocery store and involving them in looking at the prices and talking what is more or less value for your money is a great way to get them involved and more aware of the cost of things. For instance if your five year old wants a candy bar they can find it and check the price. Do they have enough money? How much do they need to save to get it? Or how much money will they have left after buying it. How about the bank? Around the age of 10 you can take them in to set up their own savings account (check with your local branch concerning their guidelines). Then maybe once a month you can take your child to deposit the money from their weekly allowance that was set aside for savings and allow them to keep the ledger for the account. It is important to allow your children to spend their money as they choose, within your guidelines. They need the opportunity to make mistakes and learn from them. When my oldest was 9 or 10 she just had to have this oinking pig that was all the rage at the time. I warned her about its lack of usefulness and how she might feel about spending $12 for something she may not play with very long. Wouldn’t you know that a month later it was heading to the garage sale pile with high hopes of recouping some of the money spent on it! Above all, talk to your kids about money. They see us handling and using money every day but if we don’t talk to them about the what, how, and why, then they will miss out on many wonderful learning opportunities. Money Sense Resources for Use With Young Kids Jump$tart Coalition is a national coalition of organizations dedicated to improving the financial literacy of pre-kindergarten through college-age youth by providing advocacy, research, standards and educational resources. Jump$tart strives to prepare youth for life-long successful financial decision-making. Doughmain seeks to make life easier with a family organizer packed with tools for your busy lives. Recognizing the central role of money – and money smarts – in creating a better future, they also empower kids to become better educated and more confident about money management and financial topics. The Great Piggy Bank Adventure an online game where kids can learn the importance of wise financial planning—while having fun! Designed for kids, this board game is also a good way to get the whole family together for some playful lessons in financial management. Planet Orange is an exciting new planet in the deepest reaches of outer space that helps kids, from 1st to 6th grade, learn about earning, spending, saving and investing. For me, For you, For later ~ First Steps to Spending, Sharing, and Saving is presented by Sesame Street and is a bilingual multimedia program created to help families share experiences in developing financial basics that will impact their children now and in the future. Kid$Wealth is a program designed by leading educators looking for a better way to teach children about money, the Kids Wealth program is designed to structure the formative years (4-12) when children can develop proper savings habits. Board Games such as The Game of Life, Pay Day, Monopoly, and a favorite for the younger ones in our house, The Allowance® Game are great ways for your family to be together, have fun and learn about money all at the same time.
3 Comments
I knew nothing about financial literacy until I was 35 years old. I learned because I was deep in debt, I was sick and tired of being sick and tired and I knew I didn't want my kids to lead the same life I had lead to that point. Your kids will only learn financial literacy one way, that's you. You see, I was always under the belief that the schools should be teaching our kids about the financial side of life.
Parents don't know, so who is going to teach them? The schools? There are some schools that do have curriculum's for this, but they are few and far between. My parents didn't teach me, coming out of high school I had no clue about anything to do with money. I couldn't tell you what an RRSP was, I couldn't tell you what an RESP was. I couldn't tell you much about stocks, mutual funds, index funds, life insurance etc, etc, etc. Can You? I remember going to get my first loan for my first vehicle that I bought myself when I was about 22 years old. The lady at the bank asked me if I'd like to start an RRSP. I didn't even know what that was & really, at the time, I had no interest in starting one. Due to those financial items I just mentioned, I was always under the belief that these things should be taught in school to prepare us for adulthood and the real world. The more and more I thought about it over the last couple of years, the more I realized that I don't really want our government creating a curriculum to place into a school system when our governments themselves can't keep their budgets in control. What it really comes down to is you, the parents, teaching your kids financial education. I know most of you would ask, if I don't know it, how do you expect me to teach my children? The simple answer is learn. Read a book or two, there are plenty children's book series about money available. I learned my financial education by myself, I read books, I listened to podcasts, audio books, and watched videos. I had at one point in my life, not including my mortgage, over $100,000 in debt, One Hundred Thousand Dollars in consumer debt is nuts. Myself and my wife ended up paying off 50 K in 12 months which was the last of the $100,000 previously mentioned. As I said, you get to a point where enough is enough and you get sick and tired of being sick and tired. You just want to change, you need to change, you realize you have a family, you have kids, you need to be able to and want to be able to support them, leave them a legacy. You can't do that without financial literacy, when you're busy giving everybody else your hard earned money through vehicle payments and credit card payments, you cant win. You see, your income is your greatest path to wealth, and when you're money goes to paying credit card bills and vehicle payments every month, you're never going to build wealth. Want to teach your kid about financial management? Here are some nifty tips to help your child learn some valuable money lesson. It’s never too early to learn about financial management. So, why not spend some time with your kids to teach them a thing or two about money? Here are some tips that could help your child learn about planning, budgeting, and saving.
Talk openly about money The first thing you could do as a parent is start talking about money. When you’re a kid, it’s difficult to fully understand where money comes from and how it all works. If you don’t want your child to think money grows on trees, it could be a good idea to be open about your finances. Tell your little one about your income and how it gets to your bank account. Don’t forget to show them a list of all the expenses you’ve got to pay each month. Also, with the growing dematerialisation of money, children may struggle to understand what the plastic cards you keep in your wallet are for, so make sure you explain how debit and credit cards work. Use games to teach your child about money A good way to teach kids about money is to play games with them, especially when they’re still young. And it doesn’t need to be super complicated. For instance, start a role play where you’re the merchant and they need to buy food from you with a pre-defined amount of money. As your child grows older, you could give them a budget and ask them to plan the weekly food shop. If you want to teach your kid about the importance of saving and delayed gratification, how about organising some Monopoly nights with them – obviously, we can’t ensure there won’t be any fights! Let your child earn their own money If you want your child to learn the value of money, have you thought about giving them pocket money every time they complete a chore at home. It doesn’t need to be much – in fact, on average, Brits give their child £7 a week1. All you need to do is set a rate for each task they complete and hopefully, by having to work to earn money, they should understand the real value of money. Also, it could be wise transferring the money into their bank account (if they have one), instead of giving them cash, so they get a better understanding of how things work in real life. Get your child a piggy bank It’s the same thing every year! Your child gets cash on their birthday and Christmas, and they spend it straightaway. If you want to encourage them to save, it could be worth getting a piggy bank where they’re able to tuck away their money. But don’t stop there to show them the advantages of putting money aside. Get them to compare what they could get if they were to spend their money immediately and what they could buy if they wait for money to accumulate in their piggy bank. Surely, the vision of getting a bigger toy or a better video game should do the trick! Discuss wants and needs At some point in their adult life, your child will need to budget and if you want them to be good at this, it’s important to teach them the difference between wants and needs. Tell them that needs include the basics, such as food, home, and clothing, and should be prioritised. Then, explain that wants include all the rest, including the fun stuff, and make sure you mention that they’re not essentials and should be put on the side-line if money is tight. To help your child grasp the notions of wants and needs better, maybe try taking them through your budget. Show them how you plan and don’t hesitate to talk about the choices you’ve got to make to keep the family’s finances in order. Lead by example Children learn by example, so if you want your child to be good with money, you’ve got to be financially savvy yourself. Try to have an emergency fund where you put money regularly. Also, when shopping, show your child how organised you are. Stick to your shopping list and avoid impulse buys. Your child is looking up to you, so make sure you set a good example. Open a savings account for your child If you want your child to learn about saving, why not open a savings account for them? Each month, you could put a bit of money in their account and show them how their savings are doing. It could also be wise to tell them about interest rates and account fees, so they’re well-prepared for their financial future. Teach your child about investing with a Junior ISA In addition to teaching your child about saving, it could be a great idea to introduce them to investing. How do I do this, you ask? Well, opening a Junior Stocks and Shares ISA could help. With this type of account, your child will be invested in the stock market and they won’t need to pay UK tax on any profits they make, meaning they get to keep more of their money. We all want our children and grandchildren to grow up to be financially stable, to make smart financial decisions, and to be confident in managing their money. Early, consistent teaching about finances is critical—and it’s never too early to start with your own kids and grandkids! Here are 5 tips to help you teach money management principles to your kids. 1. Show your children how to create a basic household budget Allow your children to see how much basic living expenses cost (rent or mortgage, utilities, groceries, transportation, etc.). Make a list of recurring expenses, as well as a list of discretionary spending, and compare it to their hypothetical total monthly income. Take the time to balance the budget with them, considering where expenses may need to be reduced or cut all together to avoid going into debt. As you work through the budget, explain the difference between needs versus wants. 2. Allow your children to earn a weekly allowance While charts and visual aids are helpful when teaching children about money management, hands-on learning goes a long way. Teach your children that an income must be earned and give them age appropriate household chores to complete each week. If you increase their allowance each year, teach them about inflation. 3. Set a goal and create a savings plan Your child wants a new toy or to go to a concert with friends. Rather than making the purchase yourself, help her create a plan to save a percentage of her weekly allowance. Make a chart to visually track progress each week, marking off how much she’s saved to date and discussing how much longer it will take to reach her goal. Spend time talking to your child about why she wants to purchase this item, taking the focus away from the money and toward the value of the purchase. 4. Involve your children in your charitable donations Teach your children to divide their money into 3 categories: spend, save, and donate. Giving to charity allows you to discuss income disparity with your children and helps them to understand the importance of generosity. One way to do this: make a charitable donation part of their birthday gifts and allow them to choose the receiving organization. 5. Make investing fun for the whole family As your children get a bit older, give them a basic understanding of the stock market and investing by creating a hypothetical portfolio. Allow them to pick companies they’re actually interested in (Disney, Nike, fast food chains, etc.) to keep them engaged. Everyone in the family can create their own virtual portfolios. Over time you can track how well the companies did and learn from the ups and down in the markets. Financial discussions should never be taboo. By teaching money management to children and grandchildren from an early age, you’re helping to set them up for a successful financial future. |
AuthorHi! I am Tim Connolly and I am providing help to parents to bring up their children in a healthy environment. I am working in this profession from last 5 years, if you have any query regarding this please contact me. Archives
June 2021
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