Seeding essential skills; how to teach children about money, Part 1
Money is such an important aspect of all of our lives, yet, unfortunately, how to manage money is not taught in most schools. Then it is on us, as parents or guardians, to teach our kids about money. And we need to start teaching them young!
There is a lot to teach our youngsters, so I have broken this in to a two part series to make it easier for you to digest and most importantly, to implement.
Why teach our kids about Money?
They form their money habits by the age of 7!!
Whether you realise it or not, research has shown that our kids are picking up feelings towards money from the way you talk about money. They are also forming behaviours about wanting things instantly verses being happy to wait. This means we, as parents, need to start talking to our kids about money now.
Their future financial well-being will be determined by the money habits they form.
Whilst we all want our kids to get good grades so they can earn money when they are adults, if they grow up forming poor money habits, it doesn’t matter how much they earn they could still struggle financially. There are plenty of people who earn over $100,000 who go into debt and financial stress due to poor money habits. There are also people who earn very little and manage their money well and are financially secure.
Learning about money has so many benefits.
It is well known that kids who learn about money grow up to be more confident and higher self-esteem. They also have less money worries and therefore are likely to avoid a number of mental health issues that come with financial stress.
So, they are the main reasons why we need to be teaching our kids about money from a young age.
The hard part now is, how do we teach our kids about money?
As most parents were never taught about money themselves, this can be a little difficult. You might be thinking, I’m struggling with money myself, so I don’t think I’m the best person to be talking to my kids about money.
The good news is that you don’t have to be an expert with money to help change your kids’ life for the better when it comes to their financial future. You just have to commit to two key points:
- Talk positively about money around your kids. Regardless of your personal thoughts and stresses about money, focus on the positives. If they grow up with a negative mindset towards money, they are much more likely to have negative experiences.
- Help them form the three essential money habits I set out below. As mentioned above, it’s their money habits that will determine their financial future. They don’t need to become financial gurus to be good with money. The most important thing is that they need to form a savings mindset, and this will come from them developing good money habits from a young age.
The 3 Uses of Money
Before I talk about the 3-money habit they should form, a key lesson that you need to teach your kids is the three uses of money.
These three uses are:
Spend it – they’ll pick this one up naturally, but we don’t want them to see this as the only use of money.
Save it – if they learn to save, then they are likely to avoid most financial mistakes.
Grow it – If you can teach them that money can make money, then you are giving them the secret sauce when it comes to money. Most people rely solely on their salary to earn money. If your kids can learn that by saving in a long-term savings account, or even better, investing, then they will slowly start earning more and more money whilst they sleep at night.
Here is a tip to help you teach your kids these different uses of money,
Get them to think of money as ‘seeds’.
Kids will know straight away that seeds can be planted and grow into something. So, when they are given money, they will have to consider whether to give the seeds away (spend) or plant them (save).
The more they can visualise their money, the better chance they have of learning and retaining the message.
That’s it for this episode, Part 2 will be out next week.