How to Teach Your Children About Money

If you don't teach your children how to handle money, someone else will. And this is different from the risk you want to take! We will show you how you can provide your children with the advantage you want them to have and prepare them so that they can understand how to work with money at any age.

Start Early

Children shape their habits based on who and what we expose them to. They are influenced by the environment and regularly learn based on what they see. If you clarify to your children that getting something they want immediately is only sometimes for the best, develop and repeat this lesson, and they will find it easier to understand over time.

Teach by Example
Explain what you do when you issue a cheque, use an ATM card, and pay for groceries. Avoid impulse buying, and tell children you are waiting instead to be sure if you want to make the purchase. Children are attentive and learn many money-related concepts by watching you and copying your behavior. 

Discuss Wants vs. Needs
One of the first steps to teach children the value of saving is to help distinguish between desires and needs. Explain that needs include basics such as food, accommodation, and clothing; all wishes are extras. You can use your budget to illustrate how spending desires should take second place. Children should understand their desires and needs when it comes to effective financial management. The difference between these two motivators helps them develop responsible spending habits. 

Show them the Value of Savings.
It is natural for money to burn a hole in the pockets of younger children. It is essential, however, that they discover the benefits of delayed satisfaction. If they want a toy or a game, suggest that you give up ice cream permission or other immediate pleasure and instead save several weeks to make the more significant purchase. 

Explain the Difference Between Cost and Value
Help your kids understand that the cost or price of an item does not necessarily equate to the value. An item of a lesser price may (better) serve the same purpose as one that costs more. For instance, buying a car. While this may seem scary, your child will receive a license and eventually get their own car. Help them understand the cost involved in buying a particular type of car - the cost of the vehicle itself, maintenance, gasoline, insurance, etc.- and weigh it against how much value they will get. Then, compare this against a lesser-priced car and the overall value. 

Get them a Bank Account.
If your child is a teenager, you should be able to set up an appropriate bank account for them. This takes money management to a higher level and (hopefully) prepares them to manage a much larger account as it ages. It teaches responsibility and motivates them to build the bank account rather than deplete it. 

Let them have an Input into the Family Budget. One of the best ways to teach children about money is to engage them in discussions about family budgets and some financial decisions. 

They will see how responsibly you approach bills and life problems. For instance, when deciding to buy a house or a car, sit down with your kids and calculate all the costs involved. Let them understand the reason behind every decision you take. When you decide on a particular brand, let them know it is due to the cost of maintenance. When you decide on the type of insurance, let them know why. 

This will help them understand and appreciate the thought process that goes into every financial decision you make. Of course, you may have some of the necessary information at your fingertips, but a little research will provide you with more info about things such as the cost of car insurance, your mortgage, etc. 

Teach them to Give
Early adoption of non-profit habits can be a reward for both you and your child. Charity donations have been shown to have a beneficial effect on the brain. Help your children develop the habit of giving by encouraging them to give 10% of their money to help others -and this is a habit they will keep for the rest of their lives. 

Your Child and Virtual Money The use of cell phones and other digital technologies constitutes part of the daily lives of most of us. This means that your children are exposed to virtual money early on. Cover this aspect with them as well. Help them realize that virtual money is money, ,and must be managed prudently. 

Conclusion Given the importance of financial skills for life navigation, it is shocking that schools fail to teach children actual money management. Most people want to teach their children financial responsibility, but talking about money can be difficult. However, it is your responsibility as a parent to teach your children this, as you will set them up for a better financial future.