5 Lessons about money you need to teach your kids.
Experts say that if you get it right, you can prepare your kids for life – and there are some simple money lessons you can begin teaching your children at a young age.
“Kids are sponges – they see and hear almost everything, so if money is a source of stress in your household, or alternatively if it appears to be limitless, they will be taking note of that without even realizing it,” says Michelle Bowes, founder of Money Queens and author of the upcoming book Money Queens: Rule Your Money, for teen girls.
You can control the lessons your children learn and how they perceive money by actively teaching them and being mindful of how you speak about and use money around them.
But what if your spending habits aren’t so good?
Of course, many parents shy away from talking about money with their kids – either because it wasn’t discussed when they were growing up, or because they’re not sure they’ll teach their children the right lessons.
“However, if you have young children, the good news is that you have time.” At a young age, your children only need to learn very basic financial skills such as the relationship between work and money, saving, and having a money plan. Beyond that, you have time to educate yourself on more advanced financial concepts so you can teach them – and the added bonus is that the more you learn, the better your own finances will be.”
Here are five key money lessons you can start teaching your kids.
1: How money works and what it’s for
Despite the fact that we live in a cashless society, the fundamentals of financial literacy remain the same. You can teach your children about money and spending by making purchases with both cash and credit cards and then walking them through the receipts. The concept of how everything works will gradually sink in.
But when should I begin? Bowes believes that children can begin learning about money as early as the age of two or three, when you can also begin to explain that money is earned at work and used to pay for things.
“In addition,” she says, “the lessons can grow with them as they get older and have the capacity to understand more concepts.”
2: Creating a savings habit
Give your child a piggy bank and teach them how to deposit coins, birthday money, or pocket money into it, mentioning frequently how good it feels to save and grow money. Encourage your children to save money for something they really want rather than spending it right away, suggest Bowes.
“Saving is a really important habit to teach explicitly because it goes against today’s world, where you can get things right away by using a credit card or a Buy Now Pay Later scheme,” she adds. “Learning discipline and patience are important life skills in today’s world of instant gratification.” Model it yourself, so if you see something nice that you’d like to buy, explain to your child that you’ll need to save some money for it over time until you can afford it.”
3: Earning your own money
Kids must have their own money to truly learn about money management. Most parents start giving their children pocket money when they are old enough, but they don’t just hand it over; they teach them how to earn it, according to Bowes.
“It’s appropriate to start pocket money around the time they start school; for example, you could ask a 5-year-old to make their bed every day and reward them with N1,000 per week.” It doesn’t matter if they don’t do a good job; the goal at this age is to teach the connection between working and receiving a monetary reward. At the most basic level, you can explain how you work to earn money to pay for all of your family’s needs, such as food in the fridge and gifts for birthdays and holidays.”
4: Creating and following a budget
“Budgeting is simply having a plan for your money,” she says. “If your children have their own money, talk to them about what they want to do with it and encourage them to create their own basic budget, which could be as simple as a plan to save N1,000 of their weekly pocket money and keep N500 for spending.” “Another effective tool is to give them the opportunity to run a lemonade or cupcake stand, where they will have to budget their costs and learn about profit and loss.”
What else should parents teach their kids about money?
Money lessons and money management are important conversations to have with your children as they grow, because financial literacy is not taught in schools.
And if you have daughters, it’s critical to teach them about gender issues and money: “Your girls should know about the gender pay gap, the gender retirement gap, financial abuse, and how they can avoid becoming a victim of these things in the future.”
At the end of the day, the more you talk about money and teach your children about money, the better prepared they will be for a secure financial future.
Before we go, it’s only right we put you on to this new and cool feature on ALAT that allows you to automatically save a percentage of your transaction amounts as you consume goods and services. They also make a good example of an automated savings plan for children.
To use this feature, all you have to do is,
Select the transaction types you want to achieve
Select the percentage you would like to save on every debit transactions you make
Select how long you want to be saving for
Lastly, select the account that would receive your savings when it’s time to get paid!