Inside: In today’s world, teenagers can get their first credit card before learning anything about money management skills! As parents, we should BEGIN teaching kids about finance during childhood!
From Erin: This topic is very important to me and Will, as we both felt like we had to learn the ropes of money management largely on our own. We are now trying to teach financial skills to our three girls. I hope you will enjoy this advice as much as we did!
By Elizabeth Menon
It still amazes me that kids can get their first credit card when they turn 18, and often be knee-deep in debt shortly after, because they have never been taught basic financial lessons and money management skills.
How practical it would be if all schools taught a Finance 101 course in order to prepare kids to be financially responsible adults. Although they may exist, I have yet to hear about any schools that teach this topic, therefore leaving it the sole responsibility of the parent to prepare their children.
Even before I started homeschooling my children a year and a half ago, my husband and I agreed teaching our kids about finances was vital. In my opinion, the earlier the better.
Here are some suggestions on how to go about increasing your child’s financial awareness.
1. Start by explaining the basics about money.
A little after our kids turned 3, we would take money out and let our kids play with it while we explained the value of each coin or bill that they were holding. We let them sort it and stack it, all while having discussions on what the money was supposed to be used for.
2. Explain about prices of goods.
I am a strong proponent of having our kids know as much as possible about how much things cost, and choose various opportunities to point out prices of items that we purchase. Once they understood that items had a cost associated with them, my daughters started to be aware and more cautious of toys or other non-essential items they asked for.
3. Talk to them! Encourage questions.
I have always encouraged my kids to ask financial questions and will always answer them honestly with responses that are appropriate to their ages. However, I explained early on after a couple of embarrassing questions, that all money and financial queries should be directed toward either my husband or myself.
4. Devise a method for earning.
Once your kids are old enough, devise an allowance program that works for your family. We have a reward system in place that we started when our daughters were about 6 and 7, enabling them to save their own money for the toys they want. I feel the patience and hard work required to save up for something they want to buy is an invaluable experience. Now that they buy most of their own toys, the pride of ownership for their things is exceptional.
5. Teach them how to record keep.
Once you have a system in place for allowing your kids to earn their own money, help them learn how to keep track of it. Let them record their money the way adults do by giving them an unused checkbook register. If they are still working on their math skills, fill out the register with them. This will help teach them early accounting skills as well as provide a visual record for their money goals.
6. Allow your kids to research toys or items they want.
At first I wasn’t sure if I liked the idea of my kids constantly looking up toys to buy, but then I realized I’d use that passion and make it productive. Now when they research an item they want, they not only read the reviews to make sure it’s a worthwhile investment for them, but they know how to price compare between the different stores in order to get the best deal.
7. Teach your kids about different long term savings vehicles.
Introduce your kids to 529s, retirement accounts and the stock market. This topic will be more advanced, but younger kids can benefit from being introduced to the subjects as well. We have only briefly explained to our kids what 529s and retirement accounts are, however, I did teach about the stock market as one of our math subjects last year.
In the last three years that we’ve worked with our kids with money, I have seen a financial maturity take place. They have learned values like hard work, patience, and appreciation. I’m confident with the tools we are giving them, we are preparing them for the financial challenges that lay ahead.
How are you currently teaching your kids about finance?
Elizabeth is a homeschooling mom of 3 daughters ages 1, 7 and 9. Her interests include traveling with her family, upcycling small projects, all topics health related and reading historical fiction. God, her husband, and her children are the most near and dear to her heart.