Money Matters: Ten Lessons To Teach Your Kids About Money
The earlier you teach your kids about money, the better. When they are adults, they will need to know how to spend, save, and invest, so setting them on the right path when they are young can set them up for success.
Here are 10 things to teach your kids about money:
- Show them that money has to be earned
The easiest way to do this is to assign monetary value to chores around the house. There’s plenty of debate around this one, so find a stance that works for your family whether that’s all chores or a combination of a basic allowance with chores to earn extra. As your children get older, talk to them about getting a part-time job to expand their earning potential.
- Teach them about needs versus wants
Children are always tempted to go out and spend their money as soon as possible. If we’re honest, even as adults, there’s still a temptation to do this. But we’ve learned that there are other things money needs to be spent on first. That’s the difference between needs and wants.
It’s important to let them learn lessons by failing sometimes, too. So, if they can’t wait and spend their money on the first thing they see before deciding they don’t need it, they have to learn to wait until they’ve earned more before buying anything else.
- Teach them how to save
As adults, it’s great to have money saved for a rainy day or something fun. Getting children used to saving early can help to build that mindset. For young children, a good way to illustrate this is to have spend and save jars. Each time they get pocket money, they can split it between the two jars. For older children, open a bank account and encourage them to put some money into the bank for saving each time and keep the rest for spending.
- Help them learn to budget
When children leave home without being able to budget, it’s usually a recipe for disaster. Help them learn by getting them involved early in making decisions about your family budget for day-to-day expenses and bigger items like holidays. You can also set them small tasks like buying ingredients for a meal with a set budget from the supermarket.
- Show them how to save money day to day
We’re all looking for ways to make our money go a little further, so teach your kids how to save money where they can. That might be waiting until a sale is on to buy the toy they want or choosing to buy a supermarket own brand rather than a big name.
- Teach them about bills and expenses
Involve your children in the household bills and show them how to pay them. Usually, this is done online, so show them how to set up payments in advance so you don’t forget. Talk to your children about the importance of paying bills on time to avoid racking up unnecessary debt.
- Teach them about debt
Many people think of debt as a scary thing, but, in reality, most of us are technically in debt at some point in our lives. If you have a home loan, you are effectively in debt to the bank until you’ve paid it off. Even if you put things on a credit card you are in debt for a short time. Talk to your children about how debt can be used for a purpose as long as it is controlled. Show them how you ensure your debt is managed, for example, by regular mortgage payments, and talk about what you can do proactively if debt becomes an issue.
- Show them how to keep track of spending when it’s not cash
In today’s largely cashless society, it’s easy to feel like you aren’t spending money. So, it’s important to learn how to keep track of that money, especially for older children with a bank account and EFTPOS. Set them up with online banking if you can and show them how to read their bank statements, and discuss other ways to keep track of spending, like keeping receipts or keeping a spreadsheet and entering the amount each time a purchase is made, then reviewing at the end of the month to see how much is left over.
- Teach them about investing
Investing isn’t just about playing the stock market; it’s also about investing in your future through schemes like KiwiSaver or other pension schemes or making tangible investments such as buying a house. Talk to your children about the investments you are making for the future, and show how you budget for those. Of course, if you fancy trying your hand at the stock market, that’s also a fun way to show how money can be made and lost, especially with older children. Give your child a small amount to invest and ask them to research different shares before choosing what to invest in. Then you can watch for an agreed period and see how they do. If you are lucky, they’ll make you millions!
- Teach them not to be afraid of money
Lastly and possibly most importantly, teach your children not to be afraid of money. You can do this by making sensible decisions, being open about your family’s financial situation – whether good or bad – and talking to your children about the family finances when they are old enough to understand.
I hope these lessons help you talk more about money with your children. Don’t forget that adults need help with money sometimes, too, so if you are wrestling with decisions over your home loan or your finances, get in touch to see how I can help.
