It’s never really too early to start teaching your kids about money and the wondrous ways of finance. Well, obviously they need to be able to understand what you say and comprehend the concepts you’re trying to teach them. If you’re still using your “baby voice” to talk to them, then yes, they’re a bit too young.
Bring money back
When teaching your kids about money, they’re going to want to see and hold something. Showing them numbers in your bank account on a screen and trying to explain tap-and-go, Zapper or SnapScan isn’t really going to help them as a starting point.
Bring money back. As in physical cash monies for them to see, feel, count and work with. Eventually you’ll work them up to the magic of bank accounts, but for now – keep it simple. Make use of three money banks or jars that each have their own purpose: saving, spending and giving.
This way you’re also teaching them about the concept of having a budget and forcing yourself to stick to it and not dip into any of your separate savings or giving jars. Also, when they can physically see the money they have and are working with, they begin to realise that it’s not an unlimited resource that is always there. Which is also a great lesson to learn early on.
The importance of goals
Financial goals are present in every adult’s life and they’re extremely important for motivating us to stick to our goals and enjoy the reward at the end. The earlier you can instill a financial goals and rewards system with your kids, the better they’ll be at it as adults, when the savings are used for super important life events.
Establishing goals for saving is probably one of the most important financial goals because trying to save money for the sake of saving money never works. Maybe for a while, but it’s not a strong enough incentive to not dip into your savings when your spending money is up and you just really need to get those shoes because they’ve just gone on sale.
Working with their own money
Now, obviously, your child is going to need to get some money in order to start their financial learning journey. So, what do we do as parents? Give them an allowance of course. But you need to be careful because you can’t just give money for the sake of giving money. This allowance should be provided with a “you have this money to buy these things with, that I will not be buying for you” sentiment. As young kids, this can be something like sweets. If they want sweets, they must buy it with their own cash, for example. And as they grow, the items they will be responsible for will increase in value, as will their allowance.
This way they learn about the value of money and necessity.
But allowances start off small, birthdays are a year apart (and no one is really good with birthday money) and, at some point, your kids no longer get visits from the tooth fairy. So there is more you can do as a parent. You could match their savings or put them to work around the house where doing their chores generates an extra income. Or, alternatively, you can start raising a little entrepreneur who can start their own small business and dapple in the corporate finance aspects of starting a lemonade stand.
You need to remember that these are children you’re talking to and trying to get through to. They won’t be able to focus on the big words or constant money talk if you’re just sitting across from them providing them with a one-on-one lecture. They need slightly more stimulation than that.
Luckily there are money games out there that can reinforce everything you’ve been teaching your little one. Monopoly, Game of Life and Moneywise Kids are some board games for them to play, but there are also online-based games like Piggy Bank and Change Maker. It’s fun and educational at the same time and it also means less work for you in trying to explain certain concepts that are already covered by the games, like value for money which is otherwise learned through trial and error.
When they’re older
And when your kids are older and hitting those high school years, you’ll be able to start teaching them about investments, stock markets and, everyone’s favorite topic: tax. They won’t be learning about it in school and that which they do learn will never really be enough to prepare them for responsible financial habits when they leave school.
It’s important to teach your kids about finance and make sure that they understand the workings of the world in terms of money (is there any other way the world works?). Teach them things you wish your parents taught you before wandering into a crazy world of adulting. And if they make mistakes, that’s okay too. As long as they learn from them.