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Without a doubt, it is better to teach kids about money than to let them rely on personal experience. Sometimes, the latter often leads to mistakes that shape their money mindset negatively and have an impact on their habits. But when they have the guidance and mentorship to make sound decisions in handling personal finances, they have a promising future.
Children’s money habits are formed by the time they reach age 7 according to a study done by Dr. David Whitebread and Dr. Sue Bingham of Cambridge University. The study also highlights how the ability of kids to be able to direct attention, have a conversation, reflect on experiences and think on how they think about money (metacognition), shapes their money mindset. Here are 5 ways to teach kids about money that you can apply.
When it comes to teaching children a habit, it is wise to show than tell. Too many words may not be as effective. Show them how it’s done and let them do it. For example, if you’re teaching saving:
The idea is to help children understand each of the pillars of personal finance. In saving, the more they keep, the more they get to use later. While spending, they may sometimes have to prioritize what they need over what they want with the money they are given. If you’re illustrating to them debt, help them know that they may have to pay back more than what they needed to borrow. When it comes to investing, let them see that what they choose to do now can lead to something better later. And beyond that, they can find creative ways to increase the value of what they have rather than use it all. Teach kids about money practically so that they understand how to work for money and how it can work for them.
The idea is to let them gain exposure. Play games with them that test what they’ve learnt about money. In the end, their minds easily remember repeated practical lessons and these form their habits when handling money.
The best way to connect with children is to talk about what they want to talk about. Asking children what they imagine their future to be like introduces a space for you to show them the role of money in it.
Many parents today have seen their children’s talents and passions blow up on the internet. Very few parents genuinely take the time to show their children how to handle the money that comes with this.
We often believe that children are too young to know what they really want. You would hardly ever allow them to handle money or even use it to get what they want because of this. The truth is, children have preferences. They are able to learn from experiences. And they are able to form habits based on what they equate ideas with. The wealthy always find a way to show their children how to monetize what they love doing.
Do not disregard them. Let them experience the appreciation of the value their talents and passions give to others. This monetary appreciation could even become an income stream.
When they attach this monetary value to their talents and passions, they become more intentional in applying good money management skills as they grow.
Personal experiences that you share with your children illustrate how practical what you teach is. Stories pass ideals through memorable events and outstanding details in them. So instead of lecturing your child about how you’re paying more taxes and the inflation rate is soaring, tell a story.
Let your child know about how you once saved money and it came in handy in an emergency. Tell them about that one time you made a mistake and lost money. It is a great way to usher them into reality. And this way, you won’t just tell them what to do with money. You will have an opportunity to show them why you manage money the way you do.
When kids learn that Money is earned, it gets easier for them to see the value of good money management. One way to help them learn how to earn money is by giving them commissions for tasks and chores. This instils in them the understanding that when they serve and add value, they can be compensated.
“Wealth is built on a foundation of service.”
Steve Down – Wealth coach
Help them practice how to give their best and how to have the discipline necessary for their growth. This is also a way to make them become more compatible with money.
Always remember to illustrate that what they do to earn money and the quality of value they give is important. This creates a money mindset that is based on principles.
It is through principles of wealth that the wealthy teach kids how to become valuable as well as valued in society. Teach them on the importance of giving. Let them learn how to be content so that they don’t have to compare themselves unfairly with peers or friends on social media. They will also learn how to be responsible so they can understand the importance of sound financial decisions. What they gain and/or what they lose is based on the choices they make.
Teaching your children about money no matter what stage they’re in is essential. It takes time to build this foundation for their future. We believe that through personal wealth education, you can learn the principles of wealth for good money management. This is one of the best ways to help children know how to manage personal finance issues when they get older.
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What do you wish you were taught about money as a kid? Comment below
Financially Fit
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