How to Teach Your Kids About Money

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Knowing how to acquire and spend money as a mean to achieve real-life goals is a concept best presented to kids sooner than later. Face it, if you don’t teach them about handling finances now the society will later in their life. As technology and global economy evolve and change, spending money becomes easier and easier each day. With so many ways to make a purchase, transfer funds, earn and pay online, the idea of earning and spending can be extremely complex for a child to grasp. Be that as it is, it goes without saying that any words of wisdom regarding this topic should help your child understand the economy and avoid classic mistakes when it comes to using money.

Where to Start

First of you’ll need to consider their age, what they know so far about finances, and the reason why they need money for. The idea is to determine their spending budget, explain how finances work, and help them use the allowance that they have to save or spend more efficiently. This way they actually learn the importance of being responsible and strategic with money. But being responsible isn’t the only thing that will prevent them from falling for marketing tricks and enduring financial challenges later in life. There are things that they will have to learn on their own. But before they’ll have a chance to do that, you kids can learn directly from your actions, tips, and advice. Here are some things to teach your little ones when it comes to money. 

Avoid Making Impulsive Buying Decisions

No matter if you are shopping for a new toddler toy, or something entirely different when making the decision to purchase something in front of your little one, try to be the example in every way. Kids absorb every single piece of information they get from you. No matter if the information is verbal or comes in another form like body language, your actions, etc. The important thing to have in mind at all times is that they are learning from your every move, decision and mistake. So being that you’re basically being monitored at every moment you’re around them, you should be careful not to make the wrong move, lest they get the wrong idea. This applies when shopping with your kids as well, or making any purchase decision around them. They need to know that you a responsible spender, unable to make a hasty and impulsive decision when it comes shopping. Show them that you are ready to spend a couple of minutes to read the label and find out whether the item on the shelf is actually what you need. A simple glance at product description should do it. They’ll immediately recognize and understand the behavior and will definitely act the same way when making a purchase themselves.

Image of mom and daughter saving money

Being Decisive

Another important lesson includes teaching them about being decisive when buying things and spending money in general. From the moment they get their first dollar and allowance money, they’ll start to get ideas of where to spend it. And because they have such a limited list of potential ways to spend money, they’ll target candy, toys, and games. You need to show them that reckless spending on things that you don’t really need leads to bankruptcy. Teach them how to be decisive and how to make the right decision. Although explaining that there are things far more important than candy and toys at this age can be hard, try to be persistent and show alternative buying choices. Also, train them to look for a specific product instead of buying the first thing that comes to mind.

Knowing Their Budget

If you’re still wondering how to teach kids about money you might want to keep on reading. Setting their allowance is one thing. They need something to start with and have a small amount of money to save or spend on things that are “essential” for them at the moment. However, to let them understand the concept of the budget and the amount of money they get on a weekly or monthly basis is entirely different. Kids can get so reliant on their allowance money. And if you go soft on them and pump their budget without teaching them about the importance of limits they will start their reckless rampage of spending money on unimportant things. One solution to that potential problem is reminding them why they have an allowance in the first place. Remind them every time that money they get is theirs to spend but that it’s also their responsibility. Once they start to understand that you won’t be there to give them money for allowance every time, they’ll shop differently and put more thought into every shopping decision.

Image of family after shopping

Let them Experience Shopping

One of the best ways to see how your child behaves with pockets full of money is going to shopping and letting them buy some of the things they need. Great opportunity to do this is just before the school season. Being that they will need school supplies for the upcoming period, kids will love the idea of shopping together. This way they can choose the exact color and style of their backpack, pens and other essential equipment. Let them do the shopping but be there to correct their choices and show alternatives. There’s always a better model of the pen case

that’s more practical and more suitable for them or any other product for that matter. So be sure to show them this aspect of shopping as well. They’ll learn a lot, but more importantly, they feel more accomplished by picking the items themselves. Also, they’ll be able to brag and show their classmates how advances they are. Great way to go about this is creating a list of essential things they need, going over the budget limitation, and adding a couple of non-essential things to look for. They’ll feel all grown up and up to the task while buying and checking items off the list. You on the other side will monitor their choices and see how well they do.

Create a Saving Account

Everyone knows that kids and money don’t go well together. But then again, that’s normal as your role as a parent is to teach them everything including how to spend their money. No one was born with an in-depth knowledge of economy or budget management. Now that your child knows how to be a responsible spender, he might as well learn about savings. Now storing money in a piggy bank is something that you teach a five-year-old, but once they get older they should be introduced to advanced concepts of saving money in the long run.

So once they brake their last piggy bank, or store them for sentimental reasons, it’s time to teach them about savings.

Explain how it works, what are the benefits, pro’s and con’s, of saving money with this method. There are many deals that banks propose, so you can go together and decide which plan suits them the most. If they want access to their funds at any time, be sure to mention that their interest rates go along with those decisions. But the important step is going together and letting them decide what to do. It’s a valuable lesson and they will be grateful in a couple of years when they finally have enough money to buy that new gaming console or whatever they want at that moment.

How to Avoid Marketing Tricks and Purchasing Mistakes

Today everything is connected with the internet. Your child is becoming aware of this by interacting with technology and by socializing with kids of the same age group. What they don’t know is how easily we can be manipulated. Games are a popular topic among kids, and nowadays, there are tons of games both on phones and gaming consoles that lure users to spend money with microtransactions. And although there was a lot of light shed on this topic, your kid might not know about these dangers. So pay attention to how they spend their free time. If they love playing games, a great way to teach them about marketing tricks is by explaining microtransactions in games. From this example, they’ll learn a lot about how the economy really works and will definitely pay attention to similar potential mistakes.

Kids growing in this age of modern technology and technological advancements, in general, have the internet to find out about a lot of things. However, no child will explore the internet to find out how to spend money and manage finances. It’s a boring topic for them. Luckily you’re there to explain step-by-step how to be responsible with money. They will learn one way or another. Whether with your tips and words of wisdom or on their own mistakes. You’re here to make sure that they learn it the easy way.

Author: Mary Lynn Holden
Author: Mary Lynn Holden

Proud mom and stepmom to an adorable bunch of kids aged 7 and up. Deeply appreciates three things in life: the help of older siblings in the house, texts on parenting, and strong coffee. Shares her stories and experiences in order to help others navigate the unpredictable waters of parenting.

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