10 Tips to Teach your Kids about Money
Written by Kris Miller and Tias Ross
Photographed by Sandra Ajanaku
Money can be a loaded topic for so many adults, and, of course, some of that discomfort can stem from how one was taught about money as a child. However, Tia Ross and Kris Miller, activists for women’s financial rights and the founders of Legacy Shifters, argue that there are little steps you can take to assure that your kids have healthy attitudes around money.
First things first, they say: “When you first introduce the concept of money to your children, do not introduce it with stress or your stress around it. Our kids are really good at picking up the energy we have around money. If they see us frustrated and stressed about money, they could adopt some negative concepts around money at an early age. In fact, in 1st grade, teachers introduce it with pictures of coins to teach addition and subtraction. So, introducing the concept of savings and making money fun at an early age is important. Try not to make money an intimidating concept.”
For young children, you can also explain how money is related to work. “You could actually take your kid to work with you or share with them your talent and how your talent is used in exchange for money,” says Ross. “Stay more in a conversation about the mindset around earning money and making it work for you, verses directly talking money. Overall, don’t have money consume your conversations with your children every day, but do so enough to instill the knowledge of money.”
Additionally, the duo has listed 10 tips below, that are ideal for 8-years-old and up. “If you start these concepts and practice them at an early age,” they explain, “you will forever create a mindset of wealth.”
1. Share your Own Household Monthly Budget
Budgets seem abstract until they are made visual. Show your kids your own monthly budget for the household. It is best if this is visual (example: a graph or an excel sheet are perfect! If you don’t have a monthly budget for the household, make one together!). Show them the line items of what it takes to run a household financially (utility bills, rent, insurance, food, even keeping up the decor). Together you can brainstorm creative ideas for budgeting and contributing to the bottom line of the household.
2. Encourage Entrepreneurial Endeavors
Your child may be too young for an official “job” but that doesn’t mean they are too young for other entrepreneurial endeavors. Help your child brainstorm different ways to save and collect money. For example, raking a neighbor’s leaves, babysitting, collecting and returning specific recyclable items, starting a lemonade stand, etc.
3. Create a “Spending Journal”
Many people just need a place to keep all their financial matters organized. This journal is now that place! Help your child become financially aware by encouraging him or her to track expenses (even if the spending is asking you to buy something for her). Do this activity with no judgment, it is for the sake of paying attention to what is being spent. Depending on his or her age and artistic interest, your child could decorate the journal, making it personalized, colorful, and fun. (Want to get inspired? Just do a Pinterest search for “bullet journal finances.”)
4. Create a Purchase Challenge
Challenge your children to come up with a plan to purchase the next toy, clothing item, or gadget they want. Have them figure out exactly how much money they will need, how they can earn the money, and how long it will take them to earn it. For example, they could sell their old toys to a buy-back company and use that money toward something new.
5. Practice Delayed Gratification
As adults, we know life is all about delayed gratification. Especially when it comes to money. Kids are used to instant gratification. If they want an item, they want it NOW. If this sounds like your child, you might want to start slowing down the spending in order to teach them patience. Have them come up with ways to save in order to get the item and set timelines. Also, lead by example. When parents personally don’t have money for something, pay attention to your choice of words. For example, “We can purchase that item when it makes financial sense for us to do so. Let’s come up with a plan for when we will be able to purchase that.” We often tell our kids, “I am making a different choice to spend the money I have.” This empowers them to understand that we have money, maybe not the amount needed for the item they want, but we have it and we are making a different choice. It’s key to use empowering words of abundance and gratitude.
6. Give to Get
When your child wants a new item, have them donate something first to a family in need. They can clean out their old toys, books, and clothes, and donate to find items they don’t use or want anymore. This reduces clutter and encourages charitable acts.
7. Use Coffee Cans for Budgeting
With your child, choose a few categories for saving and budgeting (for example short-term savings, long-term savings, spending on everyday items, etc.). Get an old coffee can for each category and write the category name on the front. (For fun, your child can decorate the coffee cans and include pictures of what he or she wants to buy with the money. For example, the short-term savings container might have a picture of a specific toy, while the long-term container might have a picture of a trip to Disneyland.) You may also want to help your child understand that some items will take longer than others to save for. Decide how much money will go into each account when your child receives money. Then, when your child receives money (either through allowance, a gift, work, etc.) put in the budgeted amount of cash.
8. Open a Savings Account at a Bank
This can be done in addition to coffee can budgeting. Once the “long-term savings” account reaches a certain dollar amount (you can agree upon this amount with your child beforehand), it’s time to open an official saving account and deposit it into the bank! Some banks and credit unions offer kid-friendly features, such as online games, rewards for getting good grades and other perks. [Ed Note: We’re also obsessed with the new start-up LittleFund, which allows friends and family to easily chip in to help your child meet their financial goals!]
9. Create A Family “Give-Back” Program.
Pick a cause or non-profit that you are passionate about as a family, and set a goal with a plan to save and donate.
10. Teach Your Child About Compound Interest
This is an important concept to understand and so it’s best to teach our children about this at a young age. Compound interest is when you earn interest on both the money you save and the interest you earn. If you set aside $100 every year starting at age 14, you’d have about $23,000 at age 65. However, if you begin saving at age 35, you’d have about $7,000 at age 65. Assume the account earns 5% every year. Wow, check that out! To compute compound interest, use the calculators at investor.gov.
For more on this topic, check out the Mother articles on How To Save Money (Without Really Trying), and Quick & Easy Ways To Save Money As A Family, Straight From The “Money Saving Mom.”
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