Teaching Our Children About Money
As the song goes “Money makes the world go round, world go round” but for many of us we did not get a good grounding in money as we were growing up. If we want to give our own children every opportunity to succeed later in life it is important that we provide them financial literacy. Financial literacy does not have to be boring or dull and if we involve our children can turn out to be very enjoyable for everyone involved, and involve everyone from small children to ourselves.
For small children just talking about what money is and what it does is a good first step. You might involve your kids in the process of buying something they have asked for by asking simple number questions such as this item costs 1 dollar and this costs 3 dollars which is more money? Or in a similar vein you can spend 3 dollars in the store today what would you like to get with your money? This is a low pressure way to both help your child grow their financial skills and their math skills at the same time. Too often small children have no idea what money is or how it works. It is too easy to fall into patterns where children think everything is simply provided for free. With small children the point is just to introduce the concepts not make your child feel stressed about finances.
For young children it is important to help develop financial skills around saving. This can be done by showing your children that you are saving money yourself. This can be done through children savings programs which are set up by many banks. This can also be done at home by explaining that when your children receive money as gifts etc that they will divide the money into categories. One method is for your child to put ⅓ in savings, ⅓ somewhere to donate to a cause they think is important, and ⅓ which they can spend however they want. This method allows children to feel that they have control over their own money while teaching them to both save and take care of others.
For young adults it is important to take financial literacy to the next level. Consider sharing your budget with your teenager so they see where your money goes. If you don’t want to share particular details with them you can always share percentages such as rent is this amount of my budget. Consider giving your child an allowance to teach them how far money will go and give them the opportunity to do extra chores if they want more spending money for a particular reason. When working with your teenager it is important to be gentle too, while it is appropriate to say you are going to have to save money to buy the game you want, it is typically less appropriate to start charging for rent or for food. Use common sense as you are teaching your children.
For children who are about to leave the nest and head off to college it is important to get into the small details of financial literacy. Too many students sink when they have to navigate issues such as financial aid or loans. Students need a good grounding in what taking out a loan will mean for them long term. We do not want our children to face crippling student loan debt but without guidance our children will suffer. If as a parent you do not feel comfortable navigating financial aid or student loans reach out for help. There are a number of free or low cost resources which can help you understand your child’s financial aid package. Be open with your children if you do not have an answer and encourage them to reach out when they have their own questions.