Americans are so uncomfortable talking about money that we’d rather discuss marital problems, drug addiction, race, politics, religion, or sex.
Yet, money is a tool that we use every single day. To buy groceries, get gas, pay bills, and shop online.
Another aspect of money in everyday life? Many Americans are saddled with student loans, consumer debt, and mortgages they can’t afford.
Of course life is expensive, but another part of our money troubles might be that we never learned the money basics. We simply weren’t taught about money because no one talks about it.
As a parent, you are one of the main financial resources for your children. Whether you sit them down and have deliberate conversations about financial literacy or simply go about your daily business, they are watching everything you do, including what you do with money. If you want to raise financially literate children, then it’s important you teach your kids about money and provide them with resources to learn.
Benefits of Teaching Your Kids About Money
The benefits associated with teaching your kids about money are far-reaching. Because we use money on a daily basis, when we teach our children about personal finance we prepare them for real life. Just as most parents wouldn’t send their kids off into the world without knowing how to get dressed or brush their teeth, we shouldn’t be sending them out without knowing how to budget or save.
Giving your children a financial foundation doesn’t mean you need to teach them about stocks and bonds on their third birthday. You can provide age-appropriate lessons to educate them. For instance, you can incorporate fun games like playing “bank” or “store” so they can use their number skills in a fun way. You can also get your little ones a piggy bank so they can practice counting. With older kids, you can use board games like Monopoly to teach them about mortgages and financial decision-making. Modelling positive financial behaviors and having open conversations about money are also very effective methods.
What You Can Teach Your Kids About Money and Why It’s Important
Research shows that teaching children skills like delayed gratification when they are young can positively affect financial outcomes. Delayed gratification is ultimately a practice in patience and self-control. Yes, you want that toy right now, but are you willing to wait for a bigger payoff?
You may be familiar with the Stanford Marshmallow Experiment. This was a study conducted by psychologist Walter Mischel and his team. They gave children the option to eat one marshmallow immediately or, if they could wait 15 minutes, they would get an additional marshmallow.
Researchers followed up with the children who participated in these studies for decades and found that the children who were able to delay gratification grew into adults who had higher socioeconomic status and were more likely to become homeowners and plan for retirement.
You can teach your children about delayed gratification by modelling self-control and creating an environment where self-control is rewarded. An easy way to help your children learn how to develop self-control is by teaching them how to use distractions. If they really want something and find it hard to focus on anything else, encourage them to move their body, dance, or even count to 10. These strategies may sound simple but they really can work.
Teaching your kids how to create a simple budget can save them from a life of financial mismanagement. Many people don’t like the word budget and shy away from it. But when you really get down to the root of what a budget is, it’s simply a plan for your money. Without having a plan for your money, it’s easy to spend it and then not even know where it went.
Teaching your children the concept of budgeting and money management helps them to understand how much something costs and whether they have enough money to pay for it. You can help your children learn that if they want something expensive, they will have to save for it.
It would be a true disservice to your child to release her into the world without understanding the concept of credit and how to properly use credit cards. Talk to your kids about interest and demonstrate how long it will take them to get out of debt if they only pay their minimum payment. Help them to understand that credit is not free money and why maintaining a good credit score is so important for their future.
Having these conversations will hopefully prevent them from going crazy with their first credit card and racking up a mountain of consumer debt that takes them years and years to pay off.
If you have a preteen or a teenager in the house, one of the best ways you can teach them about money is by encouraging them to get a job. Once your teen is working and making money, you can talk about how much they should be putting aside from their paycheck for savings and why saving money is important.
Having a job can help them understand that money doesn’t grow on trees and, in fact, it takes a lot of hard work to earn a paycheck. Jobs for teens also teach important life skills like how to deal with other people and personalities and how to negotiate a raise.
Why You Should Give Your Children a Financial Education
It’s so important for parents to talk to their children about money and give them a basic financial foundation because you are their main source of information. In a world of credit cards, interest payments, and student debt, raising financially literate children has never been more important. Teaching kids about money can help them develop good money habits and prevent them from making huge financial mistakes and going into debt.
When it comes to teaching your kid about money, start simple and start early. If you struggle to understand personal finance and are worried that you don’t have the knowledge to teach your kids, then help them find useful money resources like websites, books, and financial podcasts. Think of it as an opportunity to teach your kids financial literacy while also improving your own skills.
— By Jessica Martel