If you can set your child on to adulthood with just two simple money lessons learned, you’ll have done well. Firstly, the value of money – what it really represents (i.e. hard work, education, commitment, possibilities, opportunities, lifestyle, security and so on). Secondly, that money can work for you (which is a good thing) or you can work for it (not such a good thing). Any young adult starting life out on their own that has a good grasp of those two concepts (coupled with good money habits) will most likely have a financially secure future.
Even if we haven’t done a stellar job of our own finances there’s no reason we can’t help our children forge a more rewarding financial path - but our children will inherit many of our principles, morals and habits whether we like it or not. They learn by watching us, listening to us, learning from us and mimicking us.
So, what’s your attitude to money? What message are you sending to your children through the way you talk about money and manage your own financial affairs? Of course, your children can’t see you earn your money, they can’t see your bank account, the bills you pay, your investments (or lack thereof) etc. But they can and do see your attitude to money – that’s on full display 7 days a week. So take a close look at your own money habits with regard to your children. Are you spoiling them? Do you part with money loosely in order to buy them things or to keep them quiet? Do you make lots of impulse purchases? If you’re going to teach your children about money, make sure the message is consistent between what you’re telling them and what they’re seeing.
Start early. As soon as your child understands the concept of numbers introduce them to ‘money talk’. An easy way to introduce money talk with your child is to remember that money and math go hand-in-hand. As you help your child with numbers and math, introduce money concepts. E.g. instead of asking ‘What’s 6+3?’, ask instead ‘If I buy two items, and one cost $6 and the other costs $3, how much have I spent?’.
Another math/money example might be through simple buying questions like, ‘What do you think – should I buy one of these for $2, or get two for $3 dollars?’. Let them do the math in their head and suggest a course of action (there’s an extra money lesson in there – do you really need the second item?). Children love to think and ponder about things, and questions like that will get their brains working overtime.
The Ongoing Discussion
Keeping in mind that this in an ongoing process look for ways in your everyday life that you can introduce financial learning concepts. And remember, it’s not just about ‘money’ – it’s about everything associated with money as well, such as work ethics, good money habits, careers, understanding marketing manipulation, philanthropy and so on. There’s many ways to bring good money habits into the conversation. Some examples:
- Stimulate their imaginations by asking what they would do if they had lots of money. Role play with that and engage in a meaningful way about the choices they would make with their money.
- Play games like Monopoly. There are versions of the game to suit most ages and tastes.
- Talk to your children about your job (if you have one) and where the money comes from.
- Include your child in as many conversations as is realistic when it comes to financial issues concerning the family, for example, staying in a hotel whilst on vacation. Discuss room rates, location and value for money, etc.
- Talk to your child about commercials – wherever you come across them. A good example is children’s toys advertised on T.V. Often they are depicted in very unrealistic ways that make the toy appear a lot more interesting than it will be in real life. Of course, it’s the child’s imagination that brings the toy to life, but discuss with your children about what they see on T.V. versus what the toy will be like in real life. Talk about branding, marketing and other persuasion techniques that companies use to sell their products (particularly for children 12+ years of age).
- When talking about the cost of things, discuss the item in both a monetary value and a time value. For example, ‘This toy is $50, or 5 weeks of allowance money’ (assuming they get $10 of allowance money per week). This helps your child to visualize how much effort is required to save for a particular item.
- For older children, try to get them excited about money. Track down stories of young entrepreneurs and show them to your child.
- When your child is old enough, get him or her to pay the cashier when making purchases. And, as math and money go hand in hand, get them to check the change to make sure they received the right amount.
- Encourage philanthropy. They might be very reluctant to part with their hard-saved money, but donating old toys is a great way to introduce the concept.
Give them the tools to learn
A key to understanding the concept of money is learning that money is ‘limited’ and that it’s not that easy to come by. Weekly allowances are a good way for your child to learn about money being finite. The impulse to buy immediately will wane after a few weeks of their allowance being spent within the first day or so.
Let them earn extra pocket money through tasks or jobs, but don’t reward chores that should be done without monetary reward (e.g. making their bed or tidying their room). Part of their money for work education should be learning that not all work is exchanged for money, and that there are some things that just have to be done. And once they start to get money of their own, make sure that they have a piggy bank, purse/wallet and bank account and encourage the use of them all.
As mentioned at the top of this article, there is no ‘finish line’ when it comes to learning about money. And nor is it a test or exam. So start simple - it’s far too easy to over-estimate your child’s grasp of the world and try to introduce concepts that are too far advanced for their age. Their money education is going to last a lifetime, so make the learning as fun and interesting as you can. They might even thank you for it in 40 years’ time.