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Teaching Kids About Money

Person putting coin in piggy bank

Educating your children about finances at an early age is a great way to help them develop good saving habits and a healthy relationship with money.  As a result, they’ll be better prepared to handle whatever financial situations that life may throw at them later.

Get Comfortable

Many parents are hesitant to discuss money with their children.  They may feel they don’t have a strong understanding of financial concepts themselves or there may be some discomfort around their own financial situation. That’s okay.  This is a great opportunity for parents to learn along with their children.  In addition, educating children about money can help keep them from developing bad spending habits.

It’s Never Too Early

The earlier you start teaching your children about money, the better.  Basically, you can start the conversation around money as soon as they can count, often in preschool or kindergarten.  Even at an early age, they can understand some of the basic concepts like saving and spending.

Explain Needs vs. Wants

Understanding this difference is key because it introduces the idea of prioritizing spending.  Housing, food, and clothing are needs.  The latest headphones are a want.  One way to help kids understand this difference is by looking at some of the items in your home and determining whether they are a “need” or a “want.”

Share the Benefits of Delayed Gratification

We live in an age where FOMO (fear of missing out) is a constant presence and instant gratification seems to be everyone’s default setting.  Help your kids understand how taking the time to earn and save money to purchase a “want” can make the purchase more satisfying.  Also, let them know that comparing their lives to their friends’ or what they see on social media is a bad idea because every family’s financial situation is unique.

Show Them that Money is Not Given, It’s Earned

Having your kids work for their money will help them understand money’s role in society: that it is given in exchange for work performed, not handed out for free.  Your children can earn their money by performing chores around the house.  While this payment is traditionally referred to as an “allowance,” many are now calling it a “commission” to better convey that the money was earned.

Give Them a Place to Keep Their Savings

For preschool and early elementary school-aged children, a piggy bank or clear jar works great.  A clear jar will let them watch their money grow as they add to it.  For older children, a savings account will introduce them to banks, statements, and more.

Help Them Set Their Own Budget

Have them write down items they’d like to buy, as well as their weekly earnings.  That way, they can see how much of their earnings they’ll need to set aside, and for how long, before they can buy the items on their list. 

Don’t Stop Now

Teaching kids about money in not a one-time proposition.  It’s important to keep the conversation going and to regularly reinforce financial concepts as your children grow older and can understand more advanced concepts.

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