As a kid, giving coins to the ice cream man or reading food prices aloud to my mom in the supermarket made me feel really important. Even at a young age, I knew that money was a big deal and was very essential in the adult world.
Handling money is one of life’s most important lessons, but sadly, it's one that’s not passed on at the right age. In many school curriculums, children are not introduced to financial education until their teens, but a University of Cambridge study shows that money habits are formed by the age of seven
. Don't just take our word for it, even Warren Buffet, one of the most famous billionaires in the world, agrees. “There was a study many years ago questioning how to predict business success later in life," says Buffet. "The answer to the study was the age you started your first business impacted how successful you were later in life. Teaching kids sound financial habits at an early age gives all kids the opportunity to be successful when they are an adult.”
This means that the onus of teaching your kids about money lies primarily with their parents. Here a few handy tips on how you can introduce your kids to money and the concept of dealing with it.
The Consumer Financial Protection Bureau (CFPB)
says it’s important for the kids to know that you earn money by working for it. Explain to your kid what your job is, tell her about other professions she is familiar with—bus conductor, driver, ice cream vendor etc. Encourage her to start her own lemonade or cookie stand to enable her to understand the concept of selling and buying. Philip Taylor, a financial expert says on his blog, PT Money
, that he gave his daughter odd jobs to do around the house to earn money for a My Little Pony that she had spotted at a store. “She worked hard until she’d saved enough. Then we went to the store, and she got to buy her pony. She was so proud. It was a great lesson in money math, delayed gratification, and the power of saving,” he says. You can even teach your child to identify the different coins and notes and play games which helps them sort the money.
Introduce your child to a piggy bank or make a creative money jar
with them. Anna Luther, a mother who blogs on My Life And Kids
says, “Last summer, we made piggy banks as a family, and each child has three in their bedroom. One for saving, one for spending, and one for donating. Anytime they make money at a lemonade stand or receive birthday money, they split it up equally among their three jars. It’s not a huge act, but it does start the process at a young age that it’s okay to spend some of your money, as long as you’re giving back to others and saving as well.”
Explain to them the concept of spending money to get certain things, for instance, ice cream or a toy. When they have collected enough money, get them to empty the contents of the money jar and count the money. When you go to stores, let them know what the essential household items are by pointing at them. CFPB suggests talking about how your family decides what to buy and what to pass up.
Which is more important, buying cookies or fresh fruit? Soda or milk? Your kids are likely emulate your spending habits. Mary Hunt, personal finance expert and author of Raising Financially Confident Kids
says in Forbes
, that parents should use phrases like “We choose not to spend our money that way”, instead of “We can’t afford this.”
Assigning these simple tasks to your kids,making them accompany you to the bank or the supermarket and making them aware of the importance of saving and investment can go a long way in making them financially astute in the future
. Who knows, if they follow through you might raise the next Warren Buffet!