Teaching kids about money can make a big difference in how they approach their finances as adults. Showing them that money comes from hard work and that savings are important can give them a big advantage when they begin to get money of their own. Looking at the current financial climate of the country, we haven’t been doing a good enough job to educate the younger generations on how to handle their money.
Credit card and loan debt are at an all time high, so it is more important than ever to make sure the next group of children don’t fall into the same financial traps. There are several ways that parents and educators can teach young kids not only the value of money, but how to handle the money they have.
1. Teach patience
When teaching children about money, patience (setting goals) is a great place to start. Provide the child with a way to earn a small amount of money either through chores, good behavior, or as a reward for doing well at something. Have the child choose a toy or activity that they would like to set as their goal, and help them save the money they receive to eventually buy whatever they have chosen.
Teaching the child that instant gratification is not how life works, will help them understand that if they want something it will take hard work and patience to get it. Teaching children how to save is one of the most important key components of financial literacy.
2. Teach choices
When it comes to money, we all make choices that can determine whether we set ourselves up for financial failure or end up on top at the end. Teach children that our choices, good and bad, are one of the greatest influencers of financial security or struggle. Start by giving a small amount of money to the child, and let them choose the money’s course from a few options.
For example, a five dollar bill can go into the piggy bank as savings or it can go towards a small toy. Another way to teach choices is to let the child help you in the store. You can ask them to purchase as much canned soup as they can with five dollars and show them the difference between purchasing brand names or generic and the amount of product they will receive for their money by each choice.
Teaching children choices will provide a powerful lesson that most adults themselves struggle with. The choice of need versus want. The choice of short term versus long term. The choice of being in the red versus being in the black. Life is all about choices, and realizing that the choices made can make a big difference in our finances is a lesson we can all learn from.
3. Teach long-term
A lesson in savings for short term is a great first step when educating children, but the long term is most important of all. It may take a month of patience to save up for that new toy they want, but a college education can take an entire childhood.
Share your own financial savings plans, and the goals of those plans in the long term. For example, you put money aside every month for when you retire to ensure that you have sufficient money to survive without a job. Or perhaps you have invested a small amount monthly into your child’s education fund, why not share this and get them involved with the plan as well? Teaching children that money doesn’t just appear, and that often it takes a lot of work and time to accumulate can make them appreciate the value of a dollar so much more.
We all want the best for our children who will be our country’s next generation of leaders. As with anything, you can’t control how those children will handle their business as adults. You can, however, give them the tools to succeed by making them financially literate. Money isn’t everything, but handling money is one of life’s biggest deal breakers or makers. Give children the gift of monetary responsibility, they will thank you in their success.
Jessica Galbraith is a freelance writer and author of the travel blog The Fly Away American. She hopes that the financial lessons she teaches her own daughter through free budget software will provide her with a secure financial future.
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