“Introducing your children to the concept of money might be one of the most valuable lessons in child development that they will ever receive.”
Discussing money with your children might seem easy in theory, especially if you’re creative and make the topic engaging. The importance is behind helping them understand the importance and value of money to prepare them for the future.
There’s lots of methods to teach children about money and opportunities across various age ranges. That means you won’t have to wait till their old enough to join you on your errands and be a bystander of your experiences. However, we do agree that this technique does allow them to understand the usability of money.
If you’re considering when to start addressing the topic to your children, it’s a good idea to understand what they could be learning for each age range. Especially with more technological advances which can make it really hard to know much much they can find on their own.
There will be a time when if you only show them the way we deal with money as grown ups, that it will not be enough. You need to also show them how valuable and rewarding it is to earn money and how much it means for their stability within a society. It should be integrated with discussions about the positives and negatives of money, including the feelings that can be experienced like satisfaction or greed.
The Early Stages
Starting the learning at an early age (2 – 4 years old) can be a great point for them to gain a concept of money, whereby it doesn’t have to be an in depth understanding by acknowledging that is exists and can be used. Introducing small role play games such as a play store will contribute to a child’s development by showing them the initial interaction between a financial exchange.
Remember that kids like to be visually reinforced, so having a clear jar for them to put money in is a great way for them to see money actually growing. This will definitely have a positive impact on their perception of money and making it grow.
Once they have grasped the concept that money can be used to make purchases, you can introduce alternative forms of money, like coupons or gift cards. This can also be a great time to talk them through saving money and using other forms of currency. Now, since they commonly still love role playing, new games like pretending to be served at a restaurant where they have to pay for the food will be highly amusing for them – but also educational
An additional aspect is to include them in the process, rather than just letting them watch a parental figure. Initially by showing them how money can be used and then inviting them to participate by passing money to the register, they’ll be physically and mentally engaged in the lesson.
The In-between years, pre teens and Banking
Some parents may have their own opinions about banks and should decide if they want their kids to be around the complex banking world. If you feel like they are ready for the dialogue that should accompany this decision, then start by making them use a bank for the very first time.
They can have a savings account or you can still rely on a piggy bank, but having a real bank account can be a big deal for them and an opportunity for you to teach them something valuable about savings.
Take them grocery shopping and walk them through comparing prices, sales and once again learning about playing with money in their favour by spending less when necessary.
This is also a great opportunity to teach them a lesson on priorities. Teach them that there are some items more important than others. Being able to weigh decision over what to use money for, is a great lesson on responsibility.
During these years, it’s common for children to receive an allowance. However, rather than just giving them the money, make them earn the payment as a reward. This could be performing small tasks around the house, which will be helpful but also teaching them the lesson that money is not just given – it has to be earned.
You’ll also have to be careful when they start “making” money, as they will want to spend the money right away. Try to teach them about the consequences of impulse buying and how it is always wise to wait before purchasing an expensive item.
Teenage years and Banking
Once you’re confident your child is prepared to understand the real-life benefits of budgeting and investing into savings, it’s time to move on. This will extend on top of the standard savings accounts at the bank, but the opportunities which are available through the stock market or real estate which can be rewarding. However, it’s important to cover the ability that investments also feature a risk whereby it’s not always a guaranteed profit.
These various applications can mimic the stock market and show how your investments would have done without a financial risk. It’s about enhancing their understanding and gauging the difficulty of investments.
In addition, introducing financial planning in real-life situations will develop skills that will help them in their adult life. This could involve developing a small budget to help finance a purchase or maximise their savings.
The key point is to build a financial habit and advice you’ve developed which can continue into their adult life. Having a talk about saving for college is not a bad idea, but make sure that you sell them the idea properly, and there´s nothing more adult than talking about college and its costs.
This age group is also a great time to start showing them the benefits of donating to charity to support the less fortunate. Deliver a good life lesson that it’s important to help others and that you will feel good for helping others in return.
Now, these concepts about giving and sharing for no gain, can also be an opportunity to teach about the boundaries between contentment and ambition. Ambition is good and it helps us improve our lives and gives us the determination to go after our dreams, but we also must cherish the things that we have now and value them for the service they provide.
This is especially difficult nowadays with all the social media we’re exposed to, so expect a lot of comparisons between what they have and what their friends have, but it’s not impossible to handle.
There’s also credit cards especially designed for these purposes which are available through banks. At this time they’re facing the pre-college era so they can use your advice.
Remember that it’s not just the notion of money what counts, it’s how they embrace it. Money is good and can be rewarding, but it should also highlight the risks and dangers associated. Being wise with your money is a life lesson which you’ll want to pass onto your children, even though it’s something which sometimes can’t be avoided.
For example when most banks mis sold PPI or when the stock market crashed in 2008, many were not prepared. But generally speaking, your wise teachings will guide your child to being more financially responsible.