How Do I Teach My Children About Money?
The topic of teaching children about money is not an uncommon one. There is an overwhelming amount of information that can aide in providing guidance in this area. Unfortunately, not all of them address one of the most important aspects of this topic. In order to teach your children about money, you first have to identify your own personal beliefs, values and principles around this topic. What impact does this have on your financial decision making? What exactly do you want them to know about money? Are you looking to teach them what you were taught or are you wishing to change old patterns?
According to a report by researchers at the University of Cambridge1, children can develop money habits by the age of seven, but can be taught as early as age three. Therefore, taking advantage of opportunities to teach your children about money as you go about daily life can help them be more responsible as they grow older.
Here are some great suggestions to get started:
Allow your children the opportunity to earn an allowance.
This will instill the value of pay is compensation for a job well-done. They will also experience the gratification of saving up for something, then acquiring it, which leads to an increase of self esteem. Furthermore, they also start to understand the value of money and what it means to wait for something they want. Patience and discipline lead to better decisions as they desire bigger and more expensive items.
Encourage them to buy gifts for others or donate to charity.
Making a donation in the form of a toy or piece of clothing can start to infuse a generous spirit. It also gives them some perspective about appreciating what they do have, while recognizing that there are those less fortunate. Children have a unique ability to understand this earlier than you may think. For example, during the holidays, let them buy a toy to give to a child who is far less fortunate. This teaches them gratitude and makes them feel a part of something bigger than themselves.
Teach them to start saving a portion of their money now.
As my children began to get older, I started to teach them the importance of saving. Whenever they received a gift of money or earned money through some sort of job or achievement, they were required to save at least 20%. By doing this, my children started to gain pride in seeing their savings accounts grow. Rather than oppose this practice, they typically saved more than required. This exercise not only teaches them about the value of money, but also creates the habit of saving first.
By teaching children the value of discipline, service and savings, they will develop great financial habits that can be important throughout their lives. Finally, remember that you are the best example for your children when it comes to having good financial behavior. Actions speak louder than words.
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Resource: Dr. David Whitebread & Dr. Sue Bringham, University of Cambridge (2013). Money Advice Services: Habit Formation and Learning in Young Children. Moneyadviceservice.org.uk
"For information purposes only -- the opinions expressed are those of the author only."