Kids need to learn about the importance of saving money early in life in order to establish understanding of and acquisition of good financial habits. The key to this is modeling good spending and saving habits and reinforcing it through day-to-day conversation.
Parents have to be intentional about teaching their children about money, lest they grow up thinking that these grow on trees. Here are some ideas on how you can start your kids early on to the path of good financial stewardship.
1. Bring attention to prices
Bring your child to the grocery with you and talk about the prices of the items in your cart. Talk about deciding how to choose between two similar products using quality and price as criteria.
Talking about prices and comparing products will help your child become mindful of what he wants to buy. As the child becomes older, give him a budget whenever you go to the grocery and assign him to buy his snacks. This gradually introduces them to being responsible with what they buy.
2. Keep cash gifts
During Christmas and birthdays, kids receive cash from loved ones. Instead of allowing them to spend it all, encourage them to save the money gifts to either buy something they really like or to save for the future.
Cash gifts can grow in time, if saved and invested properly. Use this gift to start your child’s financial awareness. Bring your child to the bank when he has enough to open his own bank account.
3. Work for cash
Give kids opportunities to work for cash. Though chores should be done as part of being a household member, setting up a reward system for some time may also work.
If you have a business and you can assign some tasks to your child, let him earn from it too. Once your children are a little older you can introduce them to entrepreneurship and let them sell baked goods or other items. With these methods, children will learn the value of work and money if they get experience of it hand-in-hand.
4. Save, give, and spend
Money is not just for saving and spending, teach your child to save for giving too. For little kids, this can be introduced in a visual way with jars for saving, giving, and spending.
Let your child then choose where he wants to donate the money after a certain period. After all, the goal is to produce financially literate children who also have the capacity to empathize with others who are less fortunate.
For bigger kids, introduce the idea of investing. Although this is a topic that still escapes most adults, there are now many resources that address this topic for kids. The premise is that the child puts in money on stocks then follows the value while it grows. This can also be a way for parents to bond with their older children as they discuss the companies that they want to invest in.
Money matters should be a normal part of growing up. Children will not learn about the value of work and money on their own. They need guidance from an early age.