In today’s society it is more important than ever to teach kids about money. With the rise of contactless payments and bank transfers, physical money is becoming a thing of the past.
As a result, money is becoming an abstract concept for many kids, making it even more difficult for them to understand its true value.
However, there are some easy ways that you can teach kids about money which will support their transition to financially savvy adults.
How to Teach Kids About Money (and Why You Should)Teaching kids about money doesn’t need to be difficult. It just needs a bit of planning and consistency. Below are some suggestions to help your kids understand money:
Make it physical
Whilst you and I know what money is, it’s important to remember that some kids may have never seen it. I’ve met many kids who think that money is a magical thing that appears on demand whenever you stick a bit of plastic into an ATM machine.
This is why when teaching kids about money it’s important to use the real thing. Electronic transactions don’t work, kids need to see it, hold it and use it, so that they understand that money is something real.
As a teacher, when I teach kids about anything new, I know that I need to start with a concrete object before I can move on to more abstract ideas. Teaching kids about money is just the same.
Show them that it needs to be earned
When I was growing up, my parents always made it clear to me that my Dad had to go to work to earn money to buy food. Every time I asked where he’d gone, my Mum would reply that he’d gone to work so we could “Buy X for dinner.” So I began to associate going to work with being able to buy stuff from a very young age.
Because money is often invisible, it’s important to have these conversations with kids so that they begin to understand that money needs to be earned and that it’s a key factor in being able to buy the things we need.
This could be a simple as explaining why you need to go to work. Or you may choose to go a bit deeper and share how many hours you had to work to pay for certain items, such as the food on your table, their shoes, games console etc. It’s amazing how sobering it (even for adults) when we calculate the time we’ve traded just so that we can purchase various items.
The idea behind this is to start creating the mindset that the things we have in our life don’t come for free and to help your kids understand why money is important.
Let them earn their own money
Although I was aware that money needed to be earned, I never truly understood its value until I started earning my own.
If your kids are old enough, you might suggest that they get a small weekend or evening job to start earning some money. If they’re still young, then consider giving them an allowance in return for completing chores around the house.
It is so important that kids learn that money is something they receive in return for work, rather than something they get for free. Everybody values something they’ve worked for much more than something they’ve got for free and kids are no different.
Yes, they might moan and complain that life’s not fair – if they do then give yourself a pat on the back, you’re teaching them a valuable life lesson! Life isn’t fair and nothing comes for free.
A bit of ‘tough-love’ now and then will help them become grounded adults who understand that they have to work for what they want and who value the money they earn.
Let them spend it!
So now your kids are starting to earn some money, let them spend it. This can be a huge opportunity for you to teach them some valuable lessons about money.
After the initial high, they’ll learn that they can’t afford to buy everything they want and that saving for a high cost item takes a long time.
There’ll probably be tantrums and frustrations along the way, but this is where you can seize the opportunity to teach them some money skills that will serve them well for the rest of their life.
By teaching your kids about getting value from their money, you can get them to see that money is worth different amounts depending upon where they spend it.
For example, if they want to buy collectible cards or magazines, use it as an opportunity to point out that they can buy it now and have nothing left. Or, if they’re prepared to wait a few days, they could buy 10 times the amount from an alternative location or online marketplace such as eBay.
If you need some inspiration for where to find second hand items then check out this post.
It’s also worth teaching them about things they can get for free, such as free online books. Be sure to show them how to use sites such as Craigslist (supervised, of course!) to see if they can find what they want for free or at a reduced price.
This will teach your kids to start looking for ways they can get the most value from their money and teach them to be a savvy-shopper.
It’s important for all of us to avoid getting trapped in the scarcity mindset, and it’s no different for your kids. When you teach kids about money, encouraging them to be generous is invaluable.
From the start of their money-earning journey, discuss how there are people worse off than them and get them into a habit of giving a portion of what they earn to someone in need. It doesn’t have to be a charity, it could be that they purchase something for a relative or friend who is sick, but it’s just a way to instill generosity from a young age.
It’s important to stress here that they don’t have to give a large amount, 5%-10% is enough, but it’s a perfect way to help them appreciate all that they have and avoid a scarcity mindset.
Over to you…
So now you know how to teach your kids about money, it’s time to make a start. You don’t have to put all of the steps into place at once, but just be aware that each step you do make will start lay the foundation for your kid’s financial future. As a parent you have a responsibility to teach your kids to be financially savvy and fiscally responsible.
By taking the time to teach kids about money now, you can help them build a healthy relationship with money and a kind and generous spirit.
Do you have any top-tips or success stories about ways to teach your kids about money? Let me know in the comments below.