Hi all. I have decided this month’s column is going to be information about “teaching your children about money” because let’s face it, it is a very important skill to learn and the earlier you can teach your kids about money the better. My kids are 8 and 12 years old and I really wish I had started teaching them about money sooner.
In my search for “help” on the subject I came across 2 great articles. The first is an old article on the Your Family website and the 2nd was an article on Dave Ramsey’s website blog. After reading both I really think it is information that every parent needs to read and implement so that all our kids grow up being “money savvy”. So, having said that, I am sharing the information from those articles with you here today in the hopes it can help you too.
Tips on teaching your kids and teens money saving skills.
Give them control of their money Otherwise they will think money will always be ‘on tap’ and that they do not have to be responsible for their spending or make plans to save for bigger things. Bad spending habits mean they will take longer to become independent and could have trouble with money.
Teach them to save for money goals You might also create a chart together showing their goal, and little savings milestones along the way. That way they can get excited about watching their savings grow.
Teach them that reducing expenses makes goals come faster ‘If I want to get to a goal faster, I have to save more…’ which means spending less on other stuff. Remind them about the decision they are making every time they want to spend money.
Teach them about having a budget It does not have to be complicated, but teach them how to plan their spending, instead of having a big wad of cash that keeps getting smaller with every impulse buy.
Introduce them to the concept of investing and the growth that is their money earning money for them. It is free money, almost!
Teach them that the goal of marketing and advertising is to get us to part with our money, and how they affect us to make us do this. And talk about consumerism, and how it hurts us financially, how it is not good for the environment, and how it leads to a cluttered house full of expensive and wasted stuff.
Teach them about impulse buying and that feeling of ‘I must have it now’ that we all know very well! Have a cooling off period about a bigger purchase and teach them that what we buy should not be to impress others…
Give them control of their money otherwise they will think money will always be ‘on tap’ and that they don’t have to be responsible for their spending or make plans to save for bigger things.
These are the tips from Dave Ramsey’s blog post. They are divided into ages and are aimed for kids right from preschool age right up to the teen years.
How to Teach Pre-Schoolers About Money
Use a clear jar to save.
The piggy bank is a great idea, but it does not give kids a visual. When you use a clear jar, they see the money growing. Yesterday, they had a R5 coin, today they have a R10 note and the R5 coin. Talk through this with them and make a big deal about it growing!
Set an example.
Remember little eyes are watching you. If you are slapping down plastic every time you go out to dinner or the grocery store, they will eventually notice. Or if you and your spouse are arguing about money, they will notice that too. Set a healthy example for them and they will be much more likely to follow it when they get older.
Show them that stuff costs money.
You have got to do more than just say, “That pack of toy cars costs R120, son.” Help them grab a few Rands out of their jar, take it with them to the store, and physically hand the money to the cashier. This simple action will have more impact than a five-minute lecture.
How to Teach Primary School Kids About Money
Show opportunity cost.
That is just another way of saying, “If you buy this video game, then you won’t have the money to buy that pair of shoes.” At this age, your kids should be able to weigh decisions and understand the possible outcomes.
Give commissions, not allowances.
Do not just give your kids money for breathing. Pay them commissions based on chores they do around the house like taking out the trash, cleaning their room, or mowing the grass. Dave and his daughter Rachel Cruze talk a lot about this system in their book, Smart Money Smart Kids. This concept helps your kids understand that money is earned—it is not just given to them.
Avoid impulse buys.
“Mom, I just found this cute dress. It is perfect and I love it! Can we buy it please?” Does this sound familiar? This age group really knows how to capitalize on the impulse buy—especially when it uses someone else’s money.
Instead of giving in, let your child know they can use their hard-earned commission to pay for it. But encourage your child to wait at least a day before they purchase anything expensive. It will likely still be there tomorrow, and they will be able to make that money decision with a level head the next day.
Stress the importance of giving.
Once they start making a little money, be sure you teach them about giving. They can pick a church, charity or even someone they know who needs a little help. Eventually, they will see how giving doesn’t just affect the people they give to, but the giver as well.
How to Teach Teenagers About Money
Teach them contentment.
Your teen probably spends a good chunk of their time staring at a screen as they scroll through social media. And every second they are online, they are seeing the highlight reel of their friends, family and even total strangers! It is the quickest way to bring on the comparison trap. You may hear things like:
“Dad, Mark’s parents bought him a brand-new car! How come I have to drive this 1993 Subaru?”
“Mom, this girl at school got to spend R10,000 on her Sweet 16 party. I want to do that too!”
Contentment starts in the heart. Let your teen know that their Subaru (although not the newest car on the block) is still running well enough to get them from point A to point B. And you can still throw a memorable, milestone birthday party without spending a chunk of your retirement savings funding it!
Give them the responsibility of a bank account.
By the time, your kid’s a teenager, you should be able to set them up with a simple bank account if you have been doing some of the above along the way. This takes money management to the next level and will (hopefully) prepare them for managing a much heftier account when they get older.
Get them saving for college.
There is no time like the present to have your teen start saving for college. Do they plan on working a summer job? Perfect! Take a portion of that (or more) and toss it in a college savings account. Your teen will feel like they have skin in the game as they contribute toward their education.
Teach them the danger of credit cards.
As soon as your kid turns 18, they will get hounded by credit card offers—especially once they are in college. If you have not taught them why debt is a bad idea, they will become yet another credit card victim. Remember, it is up to you to determine the right time you will teach them these principles.
Get them on a simple budget.
Since your teen is glued to their mobile device, anyway, get them active on a simple budgeting app. Now is the time to get your teen in the habit of budgeting their income—no matter how small It is. They should learn the importance of making a plan for their money while they are still under your roof.
Introduce them to the magic of compound interest.
We know what you are thinking. You can barely get your teen to brush their hair—how in the world are they supposed to become investment savvy? The earlier your teen can get started investing, the better. Compound interest is a magical thing! Introduce your teen to it at an early age, and they will get a head start on preparing for their future.
Help them figure out how to make money.
When you think about it, teenagers have plenty of free time. If your teen wants some money (and what teen does not?), then help them find a job. Better yet, help them become an entrepreneur! These days, it is easier than ever for your teen to start up their own business and turn a profit.
There you have it everyone. I hope those tips have helped you. I cannot take any credit for this information as I myself am currently one of those parents who are trying to navigate their way through the murky waters of teaching their kids to be more money savvy!