It’s no secret that kids mimic what they see or hear their parents do. Even as you navigate your own finances, there are plenty “teachable moments” where you can teach them about money. And the sooner you start the better. In fact, a study conducted by Cambridge University shows that financial behaviours kids will take into adulthood is set by age seven.
We’ve compiled a few examples below of steps you can take to set your kids on the path to financial success:
- Teach them responsible spending
“Dad, I want this!” “Mom, can I get that?”
If this rings a bell to you, you can start the conversation with your child from an early age about forming good spending habits.
For younger kids – Lay out some dollar bills and coins for them to sort and let them understand that there is a value attached to each. You can also take them along with you on your next trip to the supermarket. If you want, give them an allowance (this could be just a few hundred dollars) beforehand to select what they would like to buy. This way, they will likely to exercise greater discretion by prioritizing their expenses. They will get to understand that the bread or bun on the shelf for example, has greater utility to them than impulse sweets at checkout.
Another strategy is to give them an opportunity to help put together the grocery list. As you peruse through the aisles together and tick off items, turn the experience into a game, by encouraging them to compare prices and pay attention to any sales promotions.
For older kids – As you watch your children become young adults, encourage them to take on a summer job while they are still in high school. This will give exposure to the financial system they will have to face as adults. Also introduce them to budgeting, which will help them to stay mindful of major financial investments they may contribute to, such as a college education.
Give them an opportunity to earn an allowance
An allowance can be a great tool to teach your kids the relationship between work and money. First put together a list of chores you believe are age appropriate for your child. For younger children, this could comprise putting away toys and books, helping you put laundry into the hamper, or folding rags or dishcloths. You may have to pay them on the spot so they can quickly make the connection that their hard work yields rewards.
Kids over seven could perform chores such as taking out the trash, sweeping, cleaning their room or taking care of the household pet. For your older kids, you can set a formal payments schedule for the allowance, similar to how payday works.
When you take them out to make their own purchases, step back and observe how they independently handle their money. Afterwards, have a discussion with them explaining about what else the money they spent could also buy – That toy they bought could have also been a Devon House run or even a trip to the zoo. By being aware of everyday costs, they will have a better sense of distinguishing between their ‘wants’ and ‘needs’.
Take them to open a bank account
If your children only see you withdrawing cash from the ATM, chances are they might question if machines simply give out money. By opening a bank account for them, they can learn not only how banking and interest works, but will begin to understand the power of saving.
School based savings programmes such as the JN Bank school savers programme is a great starting point and also give students a chance to win scholarships.
Make learning interactive
Similar to the 10/10/80 budgeting system, you can introduce them to the three-jar system. Start off by labelling three separate jars – “Give”, “Save” and “Spend”. You can decide with your child how you will allocate their spare change, birthday or holiday money into these three money categories (i.e. 1/2 for savings, rest for giving/spending or 1/3 towards each category). Giving back, whether to their weekly tithe or to a children’s home, can help them to see that money can also be a means of contributing to their own community.
You can also incorporate games such as Monopoly or cashier to help your younger kids especially to identify various denominations of money.
With these simple tips, you can set up your kids to not only becoming smarter savers but also savvy and well-informed consumers.