A good financial education can make a huge difference in a person's life. As parents, we don't want to see our children struggle or make the same mistake that we did. By giving them strategic lessons on smart money management, you could be saving them loads of headaches in the future.
Don't count on school to give your children the financial education they need, although they might offer some simple lessons, more and more schools are pushing these kinds of life skills aside in favor of more academic curriculum, like math and science. It's up to parents to provide the money skills that children need to succeed.
In this post, we're going to break down everything you need to know about giving your kids smart financial knowledge, as well as some practical lessons broken down by age. After reading, you'll feel confident that you can help your kids succeed financially.
What Do I Need to Teach?
Although you don't want to throw everything onto your kids all at once, there are several topics that you'll want to discuss with your children over the course of their childhood. These could include, but are not limited to:
- Banking and saving
- Getting a job and earning money
- Saving for retirement
- Big purchases, like buying a car or house
But how do you teach about these subjects? In the next section, we're going to break things down by age, so you can get some practical advice about how and what to teach at each level.
At this age, children start to understand that money has value. They'll watch you at the store when paying for purchases and be curious about what's happening. Discuss with them the value of money and help reinforce this idea by setting up play stores and cash registers.
Another important lesson that this age group can grasp: You may have to wait to buy something you want. This is hard, sometimes even for grownups to understand.
You can help with this lesson by setting goals with your children. Instead of simply buying everything they ask for, let them earn money by doing simple chores around the house. Or, if this makes you uncomfortable (because everyone should help with housework when you're part of a family- not to get paid, but because a family works together as a team) you could ask friends or grandparents if they have simple chores they'd like to hire your preschooler to help with. Help your child set a goal, perhaps they'd like to buy a toy truck and it cost $12.00. Give them a clear savings jar, so they can see the money adding up until they have enough for their purchase.
At this age your child can start to understand the simpler financial decisions of your household. For instance, while you're at the store explain that you're buying the larger box of cereal because it cheaper when you break the price down by pound, and you're saving money in the long run. Before you add purchases to your cart, let your child see you ask yourself, Is this something we really need? Have your child help make a shopping list, by giving them a budget, maybe $100 for the weeks groceries and explain that you need to buy everything you need with that $100, without going over budget.
At this age, children start wanting more expensive toys, so this is the perfect opportunity to practice long term saving. Instead of having them save for the $12.00 truck they wanted when they were in preschool, have them save for a $200 video game system. You'll also want to have more complicated discussions with them around money. For instance, explain the concept of insurance or paying interest when you take out a loan. Show them some of your statements or have them help calculate the interest you'd pay on a larger purchase, if it's made with a credit card.
This is the age where many children start wanting to save for a car, and that's great. Help them work toward that goal, but also have discussions about the cost of college. Explain their options and help them make a plan, so they aren't stuck with years of debt after they graduate. At this age, some credit card companies will also issue your teen a credit card, with a parent's co-signature. Have a serious discussion with your teen about the responsibility and be sure to include talks about interest payments and the cost of not paying your balance each month. If you feel they are responsible, allow them to get the card, to start building a credit score.
Even after all of this financial education, some kids are going to insist they make their own mistakes. Don't be too hard on yourself. You've done your best to teach your kids about money, and they will still make mistakes. Everyone makes mistakes, some of us more than others. If you've consciously made an effort to teach children financial responsibility, you've done your best, and honestly, you've done better than a large percentage of parents out there. So, relax, enjoy parenthood, and take comfort in the fact that you gave them everything you could.
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