Teaching Kids the Money Basics
News Your financial future doesn’t start at adulthood. It’s important to start early with kids so they’ve got good basics to build on.
It’s critical to reach young people about money matters while they are still forming their attitudes, beliefs and monetary habits, and before they’ve had to learn through costly mistakes. It will help prepare them to make smart financial decisions throughout their lives.
And, while there should be financial education for kids in our schools, parents and caregivers have an important role to play. Always be on the lookout for teachable moments for your children to learn some basic financial concepts.
Needs versus wants
Long before kids understand the concepts of investing, borrowing, and risk management, they sense the power of spending money. However, differentiating between needs and wants is essential for developing good money management skills. Without this foundation, children may have trouble controlling their spending as adults.
Help children make the distinction by asking them to list everything the family can’t live without, giving them a better appreciation for what’s really needed and providing a foundation to reflect upon when discussing spending.
“Set a limit and help them determine what they can and can’t spend.”
Throughout the year, there are opportunities to help children learn budgeting. For example, when shopping for birthday gifts, take your kids with you, and let them choose a gift. Set a limit and help them determine what they can and can’t spend. Considering developing a budget for what will be spent on a family member or friends for the year and discuss whether money can be saved or shared. Talk about the importance of staying within the budget by making wise spending choices.
For adults and children alike, saving can be hard — at any time of the year — but there’s no time like the new year to resolve to make it a priority. With smart spending decisions, there may be some holiday budget left over to get you started. Discuss the importance of putting money aside for wants over time or making a special gift to someone in need.
Make a commitment to your children and teens by setting some time aside — perhaps monthly — to work with them on personal finance. As the year progresses and your child grasps the basics, you may also want to introduce, depending on your child’s age, topics such as investing, credit, insurance and taxes.