6 Tips For Teaching Kids About Money
1. Set a good example
We all know that kids learn by example; they learn by observing and often mimicking the behaviour of their parents. Our attitudes and behaviour have a big influence on our kids in many areas of life and money is one of them. How we, as parents approach money; how we spend it, save it, talk about it, even our attitudes towards has a knock on effect to how our children view money.
2. Play time money
Do you know that children as young as 2 or 3 can begin to learn what money is, or at least how we use it? You can start teaching them at this age by setting up play shops and restaurants during play time. It is fun and educational for them too. From the age of 4 your child can ‘earn’ pocket money and decide, with your help of course, how to spend it.
Rather than attempting to explain the concept of saving to a child, use visual aids, like savings charts where they can plot and see their progress daily. Or, use something as simple as something as jars. Jar 1 is for spending as they like (with their parents approval), jar 2 is for saving towards something they want (like a toy), and jar 3 is for charity (teaching them social responsibility). It’s up to the parent what the child earns, and what percentage of that should be allocated to each jar. Your child will see the money grow, or get smaller as they save and spend money.
4. Include the kids in decision-making
It’s a good idea to include older children (around 6-10) in some of your households financial decision-making. E.g. explain why you choose a generic brand over its more expensive branded rival. You could explain to your child how you compare prices before buying items, or explain unit price comparisons in supermarkets e.g. buying larger quantities to make savings in the long run. Work on a shopping list with your child showing them the importance of planning ahead and how it can save money and reduce waste.
5. Longer-term goals
From the age of 11 you can teach your child about interest, and how it is applied to savings and loans. Your child can start setting longer term saving goals e.g. instead of the child buying a bar of chocolate every day, they could save that money towards buying an iPod. The goal might seem unreachable to them, so perhaps point out other ‘income’ which they could include in their savings plan e.g. birthday money etc. You could also opt to match their savings to a certain set amount or offer €1 for every €5 they save to actively encourage them to save.
From the age of 12 you can explain the benefits of budgeting for daily expenses and unforeseen expenses that might arise. You can explain the differences between needs and wants. You might provide a short-term loan to your child for a particular item, and charge a small interest to highlight how borrowing works. You can do some project work together with your kids to see how much your holiday loan might cost you with different financial providers. Can your family afford that holiday? Discuss what the repercussions might be if you cannot make the repayments on a loan.