Money lessons, especially from childhood, inform adult money habits. You probably have not considered it, but your financial behavior is mainly due to the money lessons growing up. For instance, you learn that debt is bad for your financial wellbeing from childhood. Also, you grow above several money myths that can put your finances in trouble through the money lessons you have learned as a child.
This blog post is about eight money lessons to teach your kids, so read on to learn more!
As a parent, it is your responsibility to build your kid's financial literacy by exposing them to as many money lessons as possible. This way, you not only set them up for life but also subtly boost your family's finances.
What are money lessons?
Money lessons are rules or essential financial principles that inform our overall financial choices and habits. For instance, the practice of learning to save money or the desire to create multiple income streams stem from the money lessons you have acquired. They are the guiding principles upon which you establish your financial blueprint for personal, business, and professional life.
Why are money lessons important for kids?
If you consider it from a bird's eye vantage point, today's kids grow up to become the financial managers of tomorrow. So essentially, the economic future of our global economy depends on the financially literate kids we have. Think of it this way; if you had a company, like a family business, your kid could only sustain the family business if they learn to operate it.
According to CNBC, credit card debt in the united states hit an all-time high of $930 billion. When children grow up to be shopaholics because of a natural appetite, they incur massive credit card debt for their parents. Also, they may never grow up to be financially independent. Therefore children need to understand the difference between earning, spending, and saving money. You do not necessarily have to be a financial expert to teach your kids valuable money lessons.
Here are eight strategic ways to build your child's financial intelligence through money lessons:
Eight money lessons to teach your kids.
Teach your kids to distinguish between their wants and needs
Discriminating between wants and needs is perhaps the first money lesson to teach your child. The reason is that children have a heightened sense of demand because of the primitive and instinctive component of their psychological development—id. Usually, kids are all about demanding things and have no idea what they want and what they need. It could probably be due to a distorted sense of right and wrong.
Fortunately, money lessons become handy tools for correcting their excessive demand. Teaching your kids to distinguish wants from needs forms the basis for building a savings culture by controlling excessive spending. You can train your kids that their needs are the essential elements of survival without which life will be unbearable, and anything else they can otherwise do without constitutes their wants. For instance, foods, clothing, and shelter are the basic needs of man. While candy, designer shoes, movie tickets, etc., are all part of their wants.
This way, your kids build the habit of wise spending, which goes a long way to influence the kind of adult they grow up to be.
You have to work to earn money.
Unless you teach them, kids probably think money grows on trees, especially when they see you use your debit card. As a result, it is critical to teach your children that you have to work to earn a living. The easiest way is to attach their allowance to chores—paying your kids to do tasks at home. This way, your child begins to build a responsibility mindset and grows to understand the value of hard work. In addition, teaching them to earn their own money is among the invaluable money lessons for kids.
Teach them to save early
If you give a child a candy box, you'll be surprised to notice the child has almost finished the entire package in four hours. You can turn their basic instinct of finishing everything into a worthwhile habit by teaching them to save. Essentially, the whole idea is to teach kids that they do not always have to spend everything. Instead, teach them to practice preservation—well, that's why you have a fridge at home.
As part of their money lessons, get them a place to save their stash. For instance, a piggy bank or savings box works for the younger kids, and a savings bank account works for the older kids. Alternatively, you can also teach them savings to build. For instance, if they need to buy a video game that costs $20 and get a monthly allowance of $5, you can teach them to save for the video game by adding up their monthly $5. Then, in four months of patient savings, they can reward themselves for their patience with the $30 video game.
Teach them to keep financial records
Tracking your finances primarily through record keeping is an excellent way to grow financially. As a result, you want to introduce your kids as they get older to financial record keeping. A great way to start is by exposing them to how you generate invoices online and manage workers' W-2 forms if you have people working for you. This way, they will grow up to be better financial managers.
Teach them about budgeting by getting them involved in the family budget
Getting your kids involved with the family budget is an excellent way to teach them proper financial planning. This way, they learn to think long-term and set long-term financial goals. For instance, you can involve them in the six-month plan for a vacation towards the end of the year. This way, they can understand the importance of long-term goals and how to plan towards actualizing them.
Teach them to be charitable through giving
Charity is an act of nobility. As a result, it is essential to teach your kids the act of giving. This way, they understand that the world does not revolve around them. They will also learn to live for others through charity. An excellent way to build the habit of giving is teaching them to give to the poor, contributing to charity movements, etc.
Let them know that it's OK to lack money sometimes.
One of the essential money lessons for kids is that it's OK to lack money sometimes. This way, you can help them be mentally prepared for when it could get rough financially. You can practice this habit by intentionally denying them some money favors. As a result, your kids learn to build financial resilience for difficult times.
Be their role model
your kids won't learn any money lessons if they don't see you living a financially responsible life. Essentially, your children draw most of their money lessons by observing you as the parent. As a result, you need to show good examples through your money habits. A great way is to refrain from impulsive buying or reduce how much you use credit cards. Also, when things get tough financially, exhibit courage and confidence by letting them know it's OK to lack sometimes. However, it is also essential to teach them that tough times don't last long.
Money mindset are part of your parental obligation to your kids. Therefore, you should never leave it to chance. Instead, as a parent, you should start early to inculcate healthy financial habits through the money lessons you teach them. Remember that the best lessons that stick are those you demonstrate in your life by being a good role model.
FAQS: How do I teach my older kids basic financial literacy?
How do I teach my older kids basic financial literacy?
The first step is to let them understand budgeting and proper spending. You can also help your older kids understand how to use credit cards wisely. Also, never underestimate the relevance of teaching them to save and elementary ways to invest their money.
What is the primary age when kids can understand the value of money?
Generally, kids can grasp the basic concept of money as a means of exchange at three years. Then by the time they are seven years, they pick up most money habits that see them through life. Therefore, it is crucial to begin early to teach the basic money lessons early in life.
What are the five sources of income?
People get money from any of these five fundamental sources: A job (wages ad salaries), self-employment or business, investment, and property (rents, dividends, interests), transfer (child-support, workers compensation, welfare, mini retirement, alimony, etc.)