As parents, we all want the best for our kids. We want our kids to get the best upbringing, the best education, the best quality of life, and the best financial situation. An important part of raising our kids and giving them a good upbringing is making sure that they grow up to be financially responsible individuals. We are the biggest influence on our children’s development and it’s important that we set good examples and become more transparent about money with our kids. This includes teaching our kids about money.
Monkey See, Monkey Do
An annual study created by T. Rowe Price called Parents, Kids and Money Survey last 2017, showed that parents are likely to pass down good and bad financial habits to their kids. This survey sampled 1,014 parents of 8-14-year-olds in the US, which analyzed parents’ attitudes and behaviours that were associated with kids’ financial habits. The survey found that positive money behaviours and expectations among kids are often associated with parents’ decision to let their kids decide how to save and spend their money on their own, as well as parents becoming good financial models. Negative and troubling money behaviours and habits were also frequently seen on kids who have a troubled history with money.
The good and bad habits that our kids learn and develop come from us, so we have to be more aware of how we discuss and treat money in front of our children.
We are the key to our own kids’ financial success. It’s important that we figure out how to teach our kids about money and how to slowly inculcate the money habits that will accompany them through adulthood.
We have to be diligent when it comes to teaching our kids about money.
We have to start exposing our kids to money and let them participate in small money decisions. That way, they begin to develop a very clear and concrete view of the value of money and how it works.
With the rise of credit card usage and the increasing number of digital and blockchain payments, the notion of currency is becoming more and more abstract. If children are not able to get a grasp of the actual exchange of money and goods, then they will develop the idea that money is endless and easy to come by.
Also, our children do not see us save when all our money interactions are digital. They do not see our salaries being wired to our accounts, and part of that being wired to our savings account. These distant digital-only transactions make it all the more important to create interactions around money at home for children to observe and copy.
Get Started on Teaching Your Kids
Forbes.com created a simple guide on how to slowly introduce your kids to money including how to slowly introduce these concepts in everyday practice and everyday encounters.
The time you start teaching your kids about the concept of delayed gratification. You teach them that whenever they want something that they don’t have the means to purchase for, they will need to wait and save up for it.
You show kids that money is a limited resource. This is when you need them to participate in actions that will allow them to practice transacting with a limited amount of money and making purchase decisions based on the budget you set.
You can begin to teach more abstract concepts like compounding interest. At Smart Way To Start we believe that it is important to explain the notion of interest even earlier – and help children as early on as possible that money in a piggy bank can’t grow. You can only fill a piggy bank but the money inside it does not grow. For that you need a savings account, so your money can be put to work. We think it is very important that children learn this from a young age, because every year counts when you are compounding interests. The earlier you start, the more money you earn.
Introducing early the notion of interest is key, because once children understand it they can also understand why debt can be dangerous. Compound interest on money you owe can make the amount owned increase very rapidly – especially with high interest rates on consumer debt. So when you children are teenagers and might receive their first credit card, It is very important to discuss responsible credit card ownership and finance charges.
Ages 14 and above
At this point, your child would be reaping from the fruits of the financial teachings you’ve been imparting since age 3, and the best you can do is to continue to be open about finances and money with your child.
If you want to learn more about how to slowly introduce your kids to money, I’ve provided 5 easy tips on this article.
If you’re interested to receive Monthly Money Tips, an email series that will help parents like you raise financially savvy children, you can sign up through the link below: