Nobody is too young to learn about money. Financial literacy is extremely important and is one of the fundamental life skills and knowledge that one needs to have to thrive. As a parent, you are your child’s first teacher – everything you impart to your child will grow to leave lasting impacts and form the habits and mindset they’ll have in the future. Imparting to them good money lessons early on is something that could be one of the best educational foundations you can lay for your child in their growing years.
You might be thinking, “Oh, they are still young. They will learn it in the future” or “I don’t exactly know much either” but you’re probably wrong. You don’t have to be excellent at personal finance skills to teach your kids the right lessons. Imparting money lessons can be as simple as cultivating simple saving habits since young. Most importantly, you need to be a role model and lead by example so financial advice comes naturally. If you are unsure how to make this dry topic exciting and understandable for your kids, try out some of NSCRA’s tips below!
01 Money is Earned, Not Given
Educate your kids on where the money comes from. Showing them your payslip and explaining to them what you had to do to find employment could be possible ways of building financial understanding. Let them know to never take money for granted, and that every single cent earned is based on an individual’s hard work.
Parents could structure allowances in such a way that they are tied to chores and other small tasks, rather than freely giving them. For example, $5 can be given to the child every time he washes the dishes or helps to purchase some household appliances. The purpose of it is to instill the correct money mindset into them from young and teaching them the importance of earning your keep.
02 Needs VS Wants
Having earned this allowance, it’s easy to splurge them all at the candy store. Our 2nd tip is to teach kids how to spend their allowances. This is where you can introduce the concept of money management and explain the differences between needs and wants. You can do so by contrasting examples of necessities such as food and water with toys that they want. This would be a great start to teach kids the importance of savings and the need to exercise restraint in their spending.
You could also help your kids by setting small saving goals and milestones to achieve. This gamifies the process for them and makes saving much more fun! Kids need to understand to only spend what is left after saving and not the other way round. If you do give allowances to your kids, perhaps you can mandate first 15% goes into the piggy bank before any spending occurs. Once kids start to instil such good saving habits, it would begin to become second nature to them in the future.
Let your kids make monetary mistakes, and show them that every financial decision they made will have consequences. If your child overspends his budget this month and borrows extra cash from you, then next month, your child will have a reduced amount. Show them the burden of debt will be one of the greatest lessons every parent can teach their children.
When it comes to teaching your kids about money, you need to learn to lead by example and slowly explain to them the importance of saving and how to manage their finances. Money lessons are never about just learning how to count money or how much money you have now, but rather, teaching and emphasizing the nuances of cultivating good financial habits. Let them start from young, make as many mistakes as they can, and learn from them so that such mistakes would not haunt them in the future.
With all these being said, there is no one correct way of teaching your kids. Every parent has his teaching style and every kid has their learning curve. As long as such money lessons do not go against your own values, the benefits can help create the roadmap of lifelong financial success for your children.
Make every single second count.
No amount of time management self-help books or training can make you perform any better unless YOU are determined and set your mind to it.