Habits are hard to break—so help your children form good financial habits now that will stay with them throughout their lives.
Lessons in money management for kids can be started very early. Even when children are small, important principles can be taught in ways they can understand and retain. Keep reading to find out more!
Financial Lessons—Good and Bad—Start Early
According to experts, kids as young as 3 are capable of understanding financial concepts, such as spending and saving. If that statistic doesn’t spur parents into action, then this one might: studies show that financial habits are formed as early as age 7.
Rampant debt and bankruptcy are clear indicators that many members of today’s society are sorely lacking in financial savvy—and research shows that bad spending habits and poor financial logic can start very early in life. But there are things parents can do right now to arm their children with key financial knowhow—and help spare them financial heartaches later on.
3 Methods for Teaching Your Tots
The following ideas can help you teach good financial habits to your children in ways that are both fun and educational:
- Delayed gratification: The notion of “instant gratification” is a dangerous one when it comes to finance—and it’s a habit kids learn young. Rather than giving your kids what they want when they want it, teach them the value of working and saving, instead. Even young children can do small chores to earn money. When your 4-year-old sees a toy he wants, don’t just grab it off the shelf and buy it; turn impulsive desires into a life lesson. Explain how much the toy costs and that earning some money can pay for it. Give children a piggy bank or savings jar and create small jobs for to do around the house.
- Open a savings account: While other children brag about new bikes or dolls, your child can brag about having a personal bank account. Schedule a trip to the bank with your child and make it a special occasion. Open an account in your child’s name and put in a small amount of money to get the account started. Explain to your child that you’ll take other special trips to the bank together to make deposits as money saves up from allowance by doing chores around the house. Help keep track of how much has been saved on a bank ledger. Explain the principle of interest and that more can be earned by simply keeping money in the bank.
- Lessons in shopping: Shopping with kids can be a constant headache, with little arms reaching out to grab treats off the shelf and little voices crying for this or that. But you can turn these trips to the store into teaching moments. For example, make a game out of finding the lowest prices for items on your shopping list: “This milk costs $4.75—do you see any milk that costs less than that?” You might also consider giving your child a small amount of money before going to the store to buy a snack or treat with that money. Consider teaching your child to look at prices to determine whether it’s in a budget or not.