There’s no hard-and-fast timing for teaching your kids about money, but you might be surprised how simple it is to start with a youngster even at age 3. You don’t need to be an expert because their grasp on the complexity won’t even begin to take hold until later in life but, putting the building blocks in place can set your kids up for a life of good money management.
Start the conversation
Talking about money is important for parents and including your kids in some of the conversation is a great intro into teaching your kids about money. Interestingly, you’ve probably already been getting help from the likes of Bluey – Bandit’s always talking about “dollar bucks”, so take some queues from there if you like.
To help illustrate how we’ll use a real-life example … A close friend of @Finance has a three-year-old son named Johnny (no kidding) who has started to show interest in cash. Obviously, the concept of bank cards and the like is beyond his comprehension so the idea of “dollar-bucks” being a tangible thing is far simpler to start with.
The family were recently in a souvenir store while on a holiday. Dad bought himself a hat with cash and handed Johnny $2 and 20cents for being such a patient little guy on their long drive to the holiday. Thus began an onslaught of questions that only a three-year-old is capable of, but the conversation about how money works had officially begun.
A brief unpack of this scenario demonstrated to Johnny how money is used, how he did something to get his own money, and indeed how it feels to put some in your pocket as a result.
Talk about needs and wants
Depending on how old your children are when you’re having these conversations, they’ll have a different idea of what a “want” is VS. a “need” but, helping them understand the difference can be a great foundation for spending habits.
Something as simple as comparing what you get as part of a grocery shop and why you buy food like this VS. eating out and the cost of that may help here. We need food, but we don’t need to eat out all the time. Building the cost comparison into this conversation can also help show why eating out costs more, thus starting a new subject about working for your money …
Talk about how you earn money
Sticking with the eating-out situation, you can talk about how the wait and kitchen staff are working to be paid. It’s how they can go home and buy their own food. It’s likely you’ve covered this with your own work: “Mum’s off to work so we can pay for food and make sure we have a place to sleep”, but it’s nice to discuss the various ways people make money.
You can even go as far as talking about how some people make more money than others but, be careful not to dive too deep here – the last thing you want is to start socially separating people who earn less or more in your child’s mind.
For Johnny in the souvenir store, he earnt his money by being a good boy during a long drive and letting him know that’s why he received it helped him grasp the idea of earning.
Give them pocket money
This is the perfect next step in teaching your kids about money after the concept of “earning” is taking hold. Give them chores if they’re old enough or use a reward chart for the younger ones. Put a figure on whatever the “job” is and stick to it.
Knowing how much a job is worth will help with savings plans and budgeting while also leaving the door open for the crafty kids to outsource or work harder.
By crafty we’re referring to a story we recently heard about a famous entrepreneur during a podcast … The interviewer asked about their first pursuit into being a business owner and the response was inspired. He basically said that once he knew that mowing his own lawn would get him $5, he went house-to-house in his street offering to mow other lawns for $10! Pretty soon he hired another kid in the street to mow all the lawns (including his own) for $5, making money while not mowing any lawns at all. Let that sink in for a minute…
Encourage Saving and start budgeting
Again, depending on the age of your child, you can use a piggy bank or an actual bank, but the concept remains. For youngsters, having tangible cash that can be seen will help, but for older kids who can grasp the idea that the money is safe somewhere is great.
To encourage saving help them set a goal. It might be a toy they want or an experience (like a day at Timezone or dreamworld). Help them understand what the goal costs and how long it might take to achieve at their current rate of earning if they don’t spend any money.
Now they know what they’re saving for they might be less inclined to ask for things in between, but if they do ask, it’s time to open the budget bag. The simplest form of budgeting comes into play here, where you can show them how their goal is impacted by what they spend before they achieve it.
For the more complex conversations you can also start talking about loans and credit. It is after all, most likely how you’ve purchased your home and well worth talking about why it’s important to factor in as part of your own budget.
Help them be generous
The act of giving is an incredibly powerful human experience. Sharing the feeling with your kids can give them the desire to help others in their own way. Encourage giving to charity when possible, discuss how buying gifts for others is all about giving and why the happiness it creates in others is so nice. Show them what charity does for others less-fortunate, animal hospitals or environmental causes and you’ll be shaping an empathetic, well-rounded money manager in the process.
It’s almost never too early to start teaching your kids about money. Be creative and make it fun and you’ll feel secure that your family will grow to be even better with money than you are.