While you may have heard it said, “Money isn’t everything” it is still a vital part of adult life and being able to take care of yourself. As such, most of us aim to raise children that will be self-sufficient adults and productive members of society. However, when it comes to finances, if you don’t teach your kids, they will learn it from someone else. The consequences of having a low financial IQ or learning incorrect principles of money management can be long-lasting for young adults. Therefore, it is prudent to prepare them to handle a bank account with a healthy balance when older by teaching them the basics from a young age. Read on for a few tips for teaching kids about money from childhood through their teenage years.
At the earliest ages, teaching kids about money means showing them concepts cost and saving. You can help them understand the idea of cost by having them hand the money to the cashier when you are paying for items at the store. You can even do these exercises as pretend play at home by having them buy their toys or setting a meal up like they are at a restaurant. As they begin to grasp the idea that money is needed to purchase items it is appropriate for them to learn about saving. Try to help them understand that sometimes you may have to wait to buy something. Help them visualize their savings by having a clear jar for them to put their money.
By the time they have grown into the tween stage, they should be capable of weighing decisions and understanding consequences. Therefore, the goals of teaching kids about money at this age are that money must be earned and consequences of purchases. They may need help understanding that if they buy a new album on iTunes, they may not have money for a new pair of shoes. You can help them understand money must be earned by assigning a dollar value to certain chores or providing compensation for academic success rather than an allowance where they are given money for breathing.
As your children mature into teenagers, they are capable of understanding more advanced concepts. You can expand on the concept of money must be earned by “helping” them find a job. However, teaching kids about money at this stage also involves teaching them about things like credit and compound interest. Once they turn 18, they will be bombarded with credit card offers, and if they don’t understand how credit works, they can easily find themselves deeply in debt. Additionally, they should consider cost when comparing colleges, especially if they will be taking out student loans. This can be a fantastic place to introduce the idea of compound interest and how interest will impact the total amount they will pay for school.
Check out this article from Forbes for more ideas on practically teaching kids about money.