Foster a Money Mindset: 7 Tips for Raising Money Smart Children
Teaching kids about the value of money is rewarding to parents and children alike! Money skills will help set your little one up for a lifetime of financial success. You can teach your children about money through many creative methods. Here are a few ways to instill some money smarts in your little ones:
Commission and Budgeting
Give your kids a commission based on the tasks and chores they do around the house, and help them create a budget with their earnings. They can spend it on anything they want, but planning it ahead of time with them teaches them to track their spendings to know where it is going. Although we may be talking a handful of dollars now, it is a lesson they will appreciate later on when they make real money of their own! Encourage them to allocate their money towards different categories such as savings, spending, and giving. This hands-on experience will teach them the importance of managing their finances and making choices based on their priorities.
Setting Savings Goals
Saving may not be a natural thing for your little one. I know it wasn’t with mine. Help teach your child about saving long-term by setting savings goals for larger purchases they want to make. Are they eye-ing that new bike? Is there a new gaming console that they don’t want to wait for their birthday to get? Break down the cost of the item with them and discuss how much they need to save each week or month to reach their goal. Especially if they earn commissions on their household work, they can also have control over how quickly they can save by doing more around the house! This exercise will teach them patience, perseverance, and the rewards of saving over time.
Engage in Open Money Conversations
Many parents don’t find money conversations to be a comfortable topic to discuss. But by being open with your children about money topics, they can get early exposure to what a smart money mindset looks like. Be transparent about money matters with your kids. Discuss basic concepts such as earning, spending, saving, and investing in an age-appropriate manner. As you have worked with them on their personal financial goals, talk about your family's overall financial goals and involve them in discussions about budgeting and financial decisions. It can be a discussion around which vacation to choose and the general costs of each option. It can be which restaurant to go to dinner at. Anything that is an appropriate financial conversation to include your children in will give them insights into how they should think of money. This open dialogue will help them develop a healthy attitude towards money and understand its role in everyday life.
Use Real-Life Scenarios
Take advantage of everyday situations to teach financial lessons. For example, when visiting a toy store, give your child a budget to stick to. With their budget, help your child compare prices, read product reviews, and make a decision based on value for money. When planning a family outing, involve them in researching and comparing prices for tickets, transportation, and food. These real-life scenarios provide practical lessons in making wise financial choices.
Practice Delayed Gratification
Using a clear money jar is a great and visual way to help your child understand the value of saving money. That way, they can physically add their money to the jar and visibly see it grow over time. It’s a fantastic method to be sneaky in teaching your kids about delayed gratification. The longer they wait to spend it, the more it grows and the larger the purchase can be! For example, if they express interest in a new toy, suggest that they save up their allowance and work with them on a plan to get that new toy. This exercise helps them understand that not all desires can be fulfilled instantly but with patience and self-control they can get what they want in time.
Encourage Savings Accounts
Once your child has understood the value of saving through the jar method, consider opening a savings account for your child. Just like their parents, your child gets their very own account for their money! Take them to the bank and explain how the savings account works. Teach them the concept of earning interest on their savings and watch their excitement grow as they see their money grow over time. This experience will introduce them to the banking system and the benefits of saving money in a secure place.
Volunteer and Donate
Giving back is sometimes not natural for kids, so teaching kids early on about donating will behoove them (and their community) for their whole lives. Encourage your children to donate a portion of their money or belongings to those in need. Set up a bake sale and donate the proceeds to a charity o their choice! Maybe your child is still learning about money and doesn’t have any to donate? No problem, they can donate their time! Engage your kids in volunteer activities or community service. Or they can tag along with you as you volunteer so they learn from your example. This experience will teach them empathy, gratitude, and the importance of giving back. It also helps them understand that money can be used to make a positive impact on others' lives.
Learning about money can be fun for both you and your children. Try incorporating a few (or all) of these in your teachings with your children to build a foundation of financial literacy. Being money smart is an important skill that they will lean on for their entire lives! Remember, each child is unique, so tailor these activities to their age and level of understanding. By incorporating these practical approaches, we can empower our kids to become financially savvy individuals who make informed choices and build a secure future for themselves.
Happy money teaching, and watch your little ones blossom into money-smart individuals!
