Money is an important aspect of life, and it's never too early to start teaching kids about it. Teaching your child about money will give a sense of responsibility and can help them understand how to prioritize spending in the future.
To help prepare your child for the future and give them a head start on having good money skills, iCASH, a direct lender in Canada encourages you to take note of the following tips broken down by age. The tips can help children of any age, including those as young as three. As long as you set some ground rules for your kids, they will be well-versed in the idea of money in no time.
Teaching Preschoolers About Money
Teaching preschoolers about money is a great way to help them lay a foundation to do well in life. Some preschoolers may not grasp the concept of money right away, but there are some fun things you can do to guide them through.
The earlier you start teaching kids about money, the better. This will give them a head start as time progresses. If you wait until they're older, it might be more difficult to instill the idea of money and how it works into them.
When you're discussing money, use actual numbers to give them examples. Instead of saying "a lot,” say "twenty-five dollars" or "two hundred pennies."
Some ways you can introduce money into your preschooler’s life is by giving them a piggy bank to put loose change in or buying some play money so they become familiar with the overall concept.
Demonstrate How Money Works
Once you've taught your little one the basic idea of play money, you can demonstrate how to use real money. You can do this by letting them watch while you pay for groceries or other items at the store. This will help them see money in action and learn more about what it's used for.
You can also introduce coins while you sort through your change jar. If you have time, you can teach your preschooler how to count the coins and the value of each one by simply showing how many dollars it equates to.
Teach the Difference Between Needs and Wants
It's important to teach children the difference between needs and wants when you are educating them about money. This will help them learn how to prioritize and gain a better understanding when it comes to spending and saving.
You can start by explaining that needs are things that keep us alive, such as food, water, and shelter. Wants are items that we can live without, but also want to have, such as new clothes or toys. In the future, your child will start learning about this as he or she begins to make buying decisions.
Teaching Elementary Students About Money
Elementary students need constant education about money. They need to learn how to spend, save, and give money well before they enter high school or college. By learning these lessons early in life, they will be less likely to struggle with their finances as they get older.
Explain How You Make Money
There's a good chance that by the time your child reaches the first grade, he or she will want to know how you make money. Since this idea can be hard to grasp, explain in simple terms what you do for work and how you get paid.
You might teach them that people go to work every day to bring home the money they need for their daily living. This will help them understand that work is needed to earn money and money is needed to buy goods and services.
Explain The Differences in Making Money
You can also teach kids about the difference between part-time jobs and full-time jobs, as well as how you pay taxes on your income. Showing this by acting out what happens when you go to work or when you get a paycheck will give a better understanding of the whole process.
It's also important to explain that not everyone makes a lot of money and some people make more than others. While this might be hard for a child to understand, at first, it's easier to explain at a younger age. This way, when they get older, it will help prepare for the real world.
Open a Bank Account for Your Child
Opening a bank account for your child can be a great way to provide a good understanding of why it’s important to have your own money and save for the things you need.
It's also important to remind kids that they can be responsible for their own bank account, too. The more responsibility you teach at a young age, the easier it will be in the future.
When it comes time to pick a bank, you might want to do some research into the best banks that offer the best interest rates on savings accounts. Some factors you should consider when looking at different banks include:
- Whether or not there are monthly fees.
- The minimum amount of money needed to open an account.
- Any additional offers or promotions.
Make Shopping a Fun Experience
If your little one likes shopping, make it a fun experience. Let them pick out some items that they like along the way. This is an especially good lesson for younger children who may not understand the value of money or how it works.
You can also make shopping a fun game by teaching your child about the various things people do when they go shopping. For example, you might want to show how to find the cheapest item at the store or how to shop for items on sale.
Teaching Teenagers About Money
Teaching teenagers about money can be especially difficult for those parents who did not receive the best financial guidance when they were young. Fortunately, there are easy ways to teach your teenager about money using real-life examples.
Avoid Impulse Buying
Ensure your teenager is aware that impulse buying should be avoided at all costs. A child may not understand this at a young age, but he or she may have a better idea in the teenage years when wanting to buy things that are not within budget. You can help your teen learn how to never buy anything on an impulse by showing examples of it happening and explaining why it's not the best financial choice.
Buying items on an impulse could also affect future savings. When a teenager is saving for something specific, he or she may be tempted to spend the money on other items instead. This can make it difficult to purchase what was originally wanted in the future. It could also lead to going over budget due to excessive spending.
You should also discourage your teen from using credit cards to make purchases. Using a credit card makes it more difficult to get back on budget, and could also lead to the accumulation of debt that is difficult to get rid of.
Teach Them About Delayed Gratification
The process of delaying gratification is another important lesson to teach a child by the time he or she reaches teenage years. This will help with practicing patience and how to manage expectations about money in general.
Mention to your teen that if they want something right away, it might cost more money. Instead of having them wait until they can get the item on sale or until an upcoming birthday or holiday, this will help them learn how patience can pay off in the long run.
Teach About Good and Bad Debt
It's also important to teach about good debt and bad debt. For example, you might share how it's okay to take out a short term loan for household repairs, or groceries because you need these things to survive. Bad debt, on the other hand, would be spending recklessly or going into too much credit card debt.
Another example of good debt would be taking out a loan to cover the cost of going to school for a degree that can be used to help with achieving goals in a certain career path.
Explain How Taxes Work
By the time your teen reaches high school, you should share your knowledge on taxes and how they work. This is especially important before they take on his or her first real job.
For example, you can share how some people get their money back when they do their taxes and others don't. You can use this lesson to explain how some people might struggle financially while others have an easier time making ends meet.
It's also important to show your teenager that you're willing to do your taxes and pay the money back because it's the law and it’s what makes the country work. You can even encourage them to help complete some of your taxes and make this a fun project for the whole family.
Be Open About Your Finances
Always be open about money and finances and how your income is spent. For example, you might want to teach your teen how to make saving money a goal that he or she would like to accomplish.
Your kids also need to know how the money you earn goes towards rent, bills, food, transportation, and other daily expenses. It’s a great way to give them a better understanding of why you can't always afford everything, or why you wait for items to go on sale before purchasing them.
Show Them How to Budget
When your teen is ready to start earning money, show them how to spend cash wisely by budgeting. You could begin by creating a personal budget by finding a free budget spreadsheet that includes all necessary expenses, savings goals, and fun money.
You could also show your child how to shop around for the best deals so that it becomes easier to learn how to stretch a dollar even further. You can then take a look at all of the purchases together and have them explain why that purchase was made.
When to Teach Kids About Money
It's never too early to start teaching kids about money and finance, and the tips we've provided above will help you hit the ground running. Remember that your child’s financial literacy depends on how much you talk about money and what you show in real-life situations.
Children will learn good money management techniques by seeing how it's done in action. In other words, they should see you making sensible purchases and saving. Put simply, lead by example and make sure you communicate a consistent message about money to them.
Teaching children about personal finance is a time-consuming process that requires effort. However, if you put in the work and keep sharing an open conversation, you'll find your guidance will yield vast benefits for years to come.