It’s never too soon to learn about money. Kids as young as three can start studying the tenets of financial responsibility, laying the foundation for a future of budgeting and balanced checkbooks.
You don’t want to overdo it when you start teaching little ones how to spend wisely. Start with the basics, then add as they get older. Eventually, they’ll learn to be completely money-savvy. In the meantime, these four tips will get them on the right path.
1. Needs vs. Wants
A preschool-aged child can learn the difference between a need and a want. The things they need to sustain life — food, water, and sleep — come ahead of the toys and treats they want. As kids grow, they can apply this simple logic to the money made from chores or part-time jobs. For example, a teenager might want to buy the latest designer sneakers, but those would be a want. In comparison, they need basic shoes for school.
Your kids can have what they want sometimes. However, they should understand wants only to come after they meet their needs. To determine if something is a want or need, ask yourself why you wish to buy it. This building block will develop a stable financial future.
2. Don’t Spend It All
Next, teach your children that saving money is just as important — and enjoyable — as spending it. Kids as young as three can pick up on such lessons. Start by teaching them how to count money. It should be relatively simple since your child probably doesn’t have a lot of cash lying around.
Show how to divide cash into spend, save and donate jars. This activity will help them realize that not all money goes to buying toys. This lesson easily translates into adulthood, as none of us should be spending an entire paycheck without setting something aside.
3. Learn From Your Mistakes
It’s essential to learn from your mistakes in life. It’s a lesson that applies to money, too. You can’t hover over your child’s financial decisions and prevent them from messing up. Instead, let them use all of their allowances on something unfulfilling. They’ll learn quickly to make better decisions in the future.
Luckily, your kids will learn this tip long before they make a costly error. Spending $50 on a fleetingly trendy piece of clothing won’t hurt as bad as losing $50,000 on a bad investment.
4. Earn Your Cash
Kids should learn how they can earn their own paycheck. Start by assigning age-appropriate chores. Toddlers can help make the bed, pick up their toys and pick up dirty laundry. School-aged kids, on the other hand, can vacuum, mop, rake leaves and wash the car.
Even if you hand over a few dollars at the end of the week, your children will learn that work provides money. From there, they’ll learn to value their cash.
How to Teach Your Kids About Finance
We don’t always give kids enough credit. Your little ones can learn a lot about money, even from an early age.
Start sharing the basics and go from there. Soon enough, you’ll have a financially savvy child on your hand. That trait will serve both of you well once they reach adulthood.