I am a firm believer in the idea that it’s never too early to teach your children about money. Take for example my nephew. He was taught at an early age (5 or 6?) the importance of savings. He put away most of the money he received for his birthday and other occasions. Fast forward to today. He’s going to be 17 and he has more money then my husband and I do (no joke!). He has been able to start not one, but two businesses (lawn care and DJ’ing) and well as a part time job. He buys his own equipment (DJ equipment is expensive too!) with his OWN money.
If only my kids learned about money the same way my nephew did. Money is like sand in my daughter’s hands. Try as we might to educate her about money, she has a hard time saving it. My son on the other hand has no interest in money, per say. He did save up to buy a pair of sneakers he wanted (in all fairness our daughter paid for her iPhone). However I feel they both have A LOT to learn. Especially now that my daughter is going to be 15 and soon old enough to get an after school job, other then the dog walking that they currently do.
Here is an interesting article that I thought my readers might enjoy on how to teach your children about money.
How many times have you heard a parent say “money doesn’t grow on trees”? How many times have you said it? As a child, it’s easy to assume that money is simple to obtain and parents have an unlimited supply. Children learn by example, so show them what you do to budget and save. Discuss your financial goals and the actions you take to reach them. By creating an environment where your children are able to ask questions, it allows them to develop their own set of economic values. In honor of Financial Literacy Month, TD Bank has come up with the best building blocks to keep in mind when teaching your child to S.A.V.E.
The ABC’s of Saving Money
Show them ways to earn money. Talk to your child about your job and what you do to earn your paycheck. Discuss what they can do to start earning money on their own. Consider offering an allowance for household chores. In your neighborhood, there may be opportunities for them to earn money doing yard work or shoveling. As they get older, encourage them to research babysitting positions or to look for a part time job after school and on the weekends.
Advise them about earning interest on savings. Let them know that the bank will actually PAY them to keep their money in a savings account by depositing interest every month. They may want to keep their money close, but knowing that their balance will get bigger in a savings account, without too much effort from them, may change their mind. While interest rates may change, it’s always zero percent for their piggy banks!
Verify their understanding of Needs vs. Wants. This may be the toughest part of the discussion. They may feel that they need that toy to play with or have to have those new jeans to wear to school. In order to help them recognize when to spend and when to save, it is vital to teach them the difference between needs and wants. Consider sitting down with them to make a list of items they want to buy and discuss which category each item would fall under. This is also a good time to talk to them about helping others and donating some of their money to charity. Encourage them to designate their funds into separate categories: saving, spending and donating.
Explain the cost of borrowing money. With the growing number of advertisements focused on the ease of applying for home and auto loans, your child may get the impression that borrowing money is an easy solution when they want something. Discuss responsible borrowing and make sure they understand the cost of borrowing money. Use an example from your own borrowing history to show them how much an item cost and how much you actually paid for it. Talk to them about why you made that decision to borrow and if it was worth it. These are decisions they will have to make at some point and, as we know, children are likely to copy the financial habits of their parents.
These are some great tips. Sadly I think there are many adults who still need to learn the ABC’s too. It’s a good thing there are online resources like Expensivity that can help you learn how to manage your money.
How do YOU teach your children about money? If you have any tips feel free to share them (leave a comment).
*I was not compensated for this post. I posted this for the benefit of my site readers. Any opinions expressed are my own.