Imagine your eight-year-old son walks through the door after playing with friends and excitedly declares, “When I get older, I’m gonna be the quarterback of the Packers and buy a mansion!”
On the one hand, you like the confidence and idea of watching him play on Sundays. On the other hand, the mansion part sparks a moment of reflection. You think, “Maybe it’s time to start teaching him about money.”
Start early
It’s never too early to introduce children to financial concepts. Teaching the basics like saving and spending helps kids develop essential financial skills early on. One practical method is assigning age-appropriate chores and rewarding them modestly. This approach helps children understand the connection between effort and earning, teaching them responsibility.
Visual aids are effective teaching tools. Using piggy banks or jars to track savings brings lessons to life, helping kids see their progress. Watching their savings grow can motivate them, reinforcing the value of delayed gratification (more on that later).
Make it fun and practical
Here are some fun and engaging ways to teach kids about money:
- Involve kids in family budgeting: Include children in planning and budgeting for family outings or activities. Discuss costs and let them make suggestions within a set budget. This helps them understand the value of money and importance of making smart choices.
- Play money-themed games: There are many board games and online simulations that teach money management, budgeting, and saving. These interactive tools can make learning about fiscal responsibility enjoyable for kids.
- Encourage entrepreneurial efforts: Celebrate small ventures like lemonade stands. These activities teach kids about money, profit, and loss, helping them understand economic responsibility. Let them handle finances, set prices, and experience the rewards of their efforts.
Lead by example
Children learn by observing their parents, so show them how you budget and prioritize expenses. Explain your financial decisions and how you save for your family’s goals. Being transparent helps them understand the “why” behind your choices.
This can be done by involving your kids in everyday financial discussions. When paying the utility bill online or making a purchase, explain the process – this will help them understand budgeting.
When talking with your kids, emphasize saving and delayed gratification by presenting a relatable scenario. For example, explain how buying a video game now that you really want prevents you from buying a bike later that you really, really want. Encourage your children to set savings goals and explain how saving is not only smart but also more fulfilling.
Teach smart spending
Here are three smart concepts you can teach your kids:
- Needs vs. wants: Help kids understand the difference between needs (essentials) and wants (non-essentials). Strongly encourage them to prioritize needs over wants.
- Comparison shopping: Show kids how to compare prices and look for the best deals. Teach them to research and compare options to find the most cost-effective choice.
- Consequences of impulse buying: Talk about the drawbacks of impulse purchases, like running out of money for something they need or missing out on saving for a desired item (like the bike).
Introducing banking basics
Knowing how banks work is essential for understanding money. Here are the key points to invest in:
- Explain what a bank does: Discuss that banks are places where people safely deposit their money. Explain banks’ role in the economy and how they lend money to people for big purchases like cars and homes.
- Teach the importance of saving in a bank: Teach your kids that saving money in a bank keeps it secure and earns interest. This is a terrific way to introduce the concept of long-term saving (see next point).
- Explain how interest works: Describe interest as money earned on savings over time. Use a simple interest calculator to show your kids how their money can grow. Discuss the benefits of long-term savings goals, like saving for big purchases or future education.
- Now, help them open a savings account: Show your children how to open a savings account and manage deposits and withdrawals.
Introducing banking basics to kids gets them on the path toward a solid financial future.
Encourage philanthropy
Don’t forget about teaching kids to give back. Explain that giving back offers benefits beyond dollars and cents – it brings fulfillment and happiness not only to you but also to others.
Involve your kids in fundraising or volunteering activities – these experiences will bring to life the impact of charitable actions and importance of generosity.
Once your kids know everything about money, you can teach them about having the right insurance coverage to protect their assets. Connect with a local agent who can customize a coverage plan that best suits your family.
