When you were a kid and someone asked you: Where does money come from? You probably thought, ‘From my parents, of course!’
While it’s great to be a child and not have to think too hard about where money comes from and budgeting, it’s a good idea to teach young ones about money, especially when it comes to budgeting, saving, and investing. When you do this, you’re setting them up for future financial success and giving them the tools to stay on top of their finances when they’re older.
Not sure where to start or at what age your child should be when you teach them about money? Read on to find out!
Children as young as three years old can understand the concepts of saving and spending, and a report conducted by researchers at the University of Cambridge reveals that children’s money habits are formed by the time they’re seven years old. We bet that’s a lot younger than you imagined!
Business magnate Warren Buffett believes that the biggest mistake parents make when it comes to teaching their children about money is that they start too late. You can start educating them on money matters from nursery school age through games. Set up a play spaza shop in the living room, and trade fake money for goods. In this way, your children will learn that things are bought with money, and because it’s a game, it’s fun to learn! The lesson isn’t a drag for them and you’re making the topic open and accessible for them to understand naturally.
We live in an age where everything goes on a card, whether through online shopping or on your cheque and credit cards at the till. This is certainly convenient and in many ways, safer than carrying cash on you, but it’s good to use cash every now and then in front of your children so that they get a tangible idea on how money works. Items bought without a physical exchange of goods is too abstract for young children to understand. Also, when you’re at the till, let them hand the money over, so they can experience for themselves how it works.
Piggy banks look a lot different now than they did 20 years ago! Instead of having a single slot where money is deposited, you’re better off getting one with four separate slots – save, spend, invest, and donate. By encouraging your kids to make more thoughtful decisions about what they want to do with money, you’re setting them up to budget like pros when they’re adults, knowing how much they can and should spend on different areas of their lives.
These kinds of banks are also typically see-through, so they can actually watch their money grow as they put more and more in.
You might think that having a multi-slot piggy bank is a great idea, until your children don’t actually want to save or invest their money – they only want to spend it now. In the beginning, it’s OK to let them spend their money to buy something that you know will only satisfy them for a few weeks at best. This is a great opportunity to teach them the value of saving for longer so they can afford to get something that they truly want.
One of the most important parts of saving and budgeting is to set a goal. Without a clear objective in mind, you’ll never be truly motivated to save because you won’t know why you’re doing it. Help your kids set goals and work out how much they’ll need to save and for how long. You can also keep a chart where they can track their progress, letting them be as involved in the process as possible.
Of course, the best way to teach children about money is to be a good example to them. If you save, budget, and invest money every month, they will see these actions as normal and carry these habits through to adulthood.
When your children start getting older, you can start including them in your purchasing decisions. So, if you need to take out household contents insurance, take them through the process of getting insurance quotes so that they can see that, if you keep a budget in mind when making financial decisions, it’s easy to stick to it.
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The information contained in this article is for informational purposes only and does not constitute professional advice.
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