How do kids learn how to handle money? When did you learn? Who taught you? Or did you teach yourself through bitter experience?
The one thing we can probably generally agree on is that not talking about things doesn’t usually make them better. If you want to start talking to your kids about money in the hope they’ll be smart with it as adults, but aren’t sure how or when to start, here are a few ideas:
Keep it simple
Don’t worry if you don’t have expert financial knowledge to impart. Your kids just need to know the basics. And there’s no need to sit them down for a lecture dedicated to money matters - you can just explain what you’re doing whenever you handle money, pay a bill or go to the bank.
Play games with money
The first thing you might do to get your kids familiar with money is to play shop or play board games such as Monopoly, that involve money changing hands.
This can get small children used to using money to buy things as well as introducing them to the concept that different coins and notes are worth different amounts and can be added together, for example one $500 note is worth the same as five $100 notes.
Turn every trip to the shops into a learning opportunity
There are many opportunities to learn about money in an everyday trip to the supermarket. For small kids, it might be enough to show them that different things cost different amounts, and let them count out the money to pay for what you buy.
For older kids write out a list together of everything you need for the week ahead from the supermarket. Agree a budget for the trip and tell them if there’s money left over when they get to the checkout, they can each choose one thing they want, no questions asked.
This should teach them to prioritise the things they need over what they want, and will encourage them to look for different priced versions of each product, to keep within the trip budget. Once they get to grips with the basic concept you can start to introduce ideas like how size of products impacts the price, and the difference between value and cost.
Pay your kids a regular amount of pocket money
Pocket money is another good way for children to practise managing money. How much to give is up to you.You probably want it to be enough that they can buy something small, or start saving for something bigger, but not so much that they get overwhelmed.
You can explain that they have the choice between spending the money or saving it, and teach them about keeping money in a safe place. After that, let them use the money however they choose, part of the point of pocket money is that it can allow children to make their own mistakes with money and learn from the experience.
Make the connection between cash and cards
Cash is probably the easiest way to begin to teach your kids about money. They can have it in their hand, then hand it over to someone else when they’re spending it, whether it’s for play or for real. But once they’ve got to grips with that, it’s probably a good idea to help them make the connection between that cash, and the “magic” card they see you using in shops.
Opening a bank account for your kids could help with this. If a portion of their pocket money goes straight into a bank account, let them see the transaction and the change in balance. Take them into the bank a few times to physically make deposits and withdrawals. It might seem old-school but it should help them make the connection between what is bought and where that money comes from.
Make the connection between work and money
Understanding where money comes from is another important connection for kids to make. Talk to them about your job, and explain that it’s how you get money to pay for things; you could even take them into your work if you can.
Linking pocket money to chores, is another simple way to teach the lesson that money is something you have to earn.
Teach the art of delayed gratification
Learning the value of saving from a young age can be one of life’s most valuable lessons. The idea you’re trying to get across is that you can’t always have everything you want right away, but if you wait and save your money, you can buy what you want at a later date.
To teach this lesson, encourage your child to think about things they want that cost more than their weekly pocket money. Help them to figure out how many weeks they would need to save to pay for it. Maybe don’t aim for something that would take more than three or four weeks to start with, so they don’t get disillusioned!
What don’t kids need to know?
Knowing what not to talk about too soon with your kids can also be helpful.
- What you earn. You don’t need to be super specific about your income or what’s in your bank account. Making the connection between where you get your money and what you use it for is enough.
- Financial stress. If you’re on a tight budget your kids don’t need to know the details of what or why. But being open and explain that you are switching brands or trying something new to save money can be a helpful lesson.
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