Given how important financial skills are to navigating life, it’s surprising that our schools don’t teach children about money. As a parent, however, you can teach your child important financial lessons — and you should.
Experts say that children as young as three years old can grasp financial concepts like saving and spending.
Parents are the number one influence on their children’s financial behaviors, so it’s up to us to raise a generation of mindful consumers, investors, savers, and givers.
Below are the top money lessons you can teach your child:
The Lesson: You may have to wait to buy something you want: This is a hard concept for people to learn of all ages. However, the ability to delay gratification can also predict how successful one will be as a grown-up. Kids at this age need to learn that if they really want something, they should wait and save to buy it.
Activities you can try for Ages 3 To 5:
1. When your child is waiting in line, say, to go on the swings, discuss how important it is to learn to wait for what he or she wants.
2. Create three jars – each labeled “Saving,” “Spending” or “Sharing.” Every time your child receives money, whether for doing chores or from a birthday, divide the money equally among the jars. Have him or her use the spending jar for small purchases, like candy or stickers. Money in the sharing jar can go to someone you know who needs it or be used to donate to a friend’s cause. The saving jar should be for more expensive items.
3. Have your child set a goal, such as to buy a toy. Make sure it’s not so pricey that they won’t be able to afford it for months. Then it just gets frustrating, and it gets hard for them to wrap their head around. It’s really more about her being cognizant that she’s saving for a goal and help her come up with a reasonable time frame to achieve this goal. Every time your child adds money to the savings jar, help her count up how much she has, talk with her about how much she needs to reach her goal, and when she will reach it. All those behaviors are really fun for kids and it gives them a sense of the importance of waiting and being patient and saving.
The Lesson: You need to make choices about how to spend money.
At this age, it’s important to explain to your child, “Money is finite and it’s important to make wise choices, because once you spend the money you have, you don’t have more to spend,” While at this age, you should also keep up with activities like the saving, spending and sharing jars, and goal-setting, you should also begin to engage your child in more adult financial decision-making.
Activities For Ages 6 To 10
1. Include your child in some financial decisions. For instance, explain, “The reason I chose the generic grape juice rather than the brand name is that it costs 50 shillings less and tastes the same to me,” Or talk about deals, such as buying everyday staples like paper towels in bulk to get a cheaper per-item price.
2. Give your child some money, in a supermarket and have her make choices about what fruit to buy, within the parameters of what you need, to give them the experience of making choices with money.
3. When you’re shopping, talk aloud about how you’re making your financial decisions as a grown-up, asking questions like, “Is this something we really, really need? Or can we skip it this week since we’re going out to dinner?” “Can I borrow it?” “Would it cost less somewhere else? Could we go to discount store and get two of these instead of one?”
The Lesson: The sooner you save, the faster your money can grow from compound interest.
At this age, you can shift from the idea of saving for short-term goals to long-term goals. Introduce the concept of compound interest, when you earn interest both on your savings as well as on past interest from your savings.
Lets teach our children about money.