Each time your young child sees you spend money, he/she is building an understanding of what money is. But the challenge is that kids these days are growing in a virtual world full of plastic money. Most transactions happen on the web or through plastic cards. Children seldom see their parents spending cash (which children associate with money). Hence, in this digitized world, teaching kids about the value of money and savings becomes extremely significant as well as challenging.
You can guide children’s understanding about money and savings by simple activities about setting goals and visualizing dreams; making good choices; and learning how to plan, spend, save and share. Over time, you’ll see that through everyday conversations and fun activities, you can help your child grow up to become financially empowered.
There’s a lot more to teaching kids about money than just handing over notes to them. By giving children early lessons on money and savings, one can help them learn to be responsible. Money lessons should ideally start at the preschool age where parents and child care providers can try to instill the habit and attitude of managing money, rather than teaching the intricacies of finance.
Work = Money: When your children are really young, they probably won’t have an allowance. However, as early as 2 years old, most children can do some small chores — like putting their plates in the sink or picking up their toys. Some people are against giving allowances, but if you are open to it, it can be a great way to teach children about money. After you decide how much to give your child, your next decision will be to determine how your child will earn that money. Children will learn the value of money very quickly if they work for it, and therefore, it is important to identify a task that they can undertake, however, small it may be.
Needs vs Wants: It is important to teach your child about the difference between need and want. You should explain to them that a need is higher on the priority scale than a want. So while wants can wait, needs should be addressed immediately. Many videos, songs, activity sheets available on the internet can be a great aid for parents. You can check out the ‘Needs Vs Wants’ song by Galli Galli Sim Sim where Elmo’s mother teaches Elmo that woolen clothes that he needs for winters are more important than a belt which he can buy later as well.
Teach your child to wait: Most often for kids it is hard to wait for the things that they want – whether it is a toy that they are desperately eyeing or a muffin that’s tempting them. Saving is also a kind of waiting- waiting to collect enough money to use it later to buy something they want. So when a child learns to wait they are learning the basics of how to save.
The famous Marshmallow study by the psychologist Walter Mischel also supports that waiting is a habit that should be taught to children at an early stage. The study began in the early 1960s at Stanford University’s Bing Nursery School, where Mischel and his graduate students gave children the choice between one reward (like a marshmallow, pretzel, or mint) they could eat immediately, vs a larger reward (two marshmallows) for which they would have to wait alone, for up to 20 minutes. Years later, Mischel and his team followed up with the Bing preschoolers and found that children who had waited for the second marshmallow generally fared better in life.
Teach your children to save: You can begin teaching children about savings at a young age. One great way is to have them tangibly see the savings by buying a transparent savings jar or a piggy bank for them. For younger kids who can’t add or count, you can draw a line on the piggy bank that gives them a sense that they’ve to save up to that level. In this way, they get a sense of moving towards that goal. You could also consider matching their savings when you think that that they are making a good investment. If you do this, make sure to explain why the investment is a good one — for example, explaining to them that why it is important to invest in a good quality toy (which may be little expensive). When they are older, you can also encourage them to start putting some of their money in the bank or set a specific weekly or monthly installment for this.
Set a good example: Younger children enjoy emulating their parents, so if they see you saving, they will also want to save. You can set a good example by having your own savings jar. Another way is to talk to your spouse about money in front of your children. You must be careful about this though because you don’t want to worry your kids by talking about serious financial troubles. If you talk about financial goals in an easy way that they can overhear and understand, that is a good start.
Also, talk to your children directly about money and let them interact with you about financial matters. Let your children add reasonable items to your grocery list. At the store, show them two similar items with different prices. Explain to your children that some brands cost more. Allow your child to help you put fruit or vegetables on a scale and explain that you sometimes pay for the amount of food you buy and that using the scale helps you see how much you will spend.
Make learning about money fun: Most children will be more interested in learning about money if you make it fun for them. Consider making or printing a savings chart for your child. Also, consider checking out some of the guides designed to make saving fun, for children. One great guide is “Dream. Save. Do.” which features Elmo putting his money in colorful jars for spending, saving and sharing.
As your children get older, you will need to come up with new ways to teach them about money, but it is definitely worth starting when they are young. Teaching your kids about money at a young age will encourage them be more responsible with money later and help them avoid bad financial habits as well.
For fun & simple ways to empower your child financially, please visit: Dream. Save. Do.
This article was also featured on Deccan Herald.