How to teach children healthy money habits
Money skills are not something we magically get at a certain age. The earlier you start teaching your children to appreciate and work with money, the better chance they have to be financially secure as adults.
Studies done in the US showed that children as young as 3 years old can understand what saving and spending is, and that children’s money habits are formed by the time they are 7. The earlier you start teaching them, the better!
Children should learn a few basic principles about money:
- Your worth as a person is not linked to how much money you have. People who have more are not better than people who have less.
- Sometimes you have to wait to buy something. This is the principle of delayed gratification.
- Spending money is about making choices.
- Money is not a plastic card or an app on your phone. When children never see notes and coins, they will struggle to understand what money is and how it flows.
- Compound interest makes your money grow. The earlier you start saving, the more time your money has to increase.
- How much money you get in is less important than what you decide to do with it.
Your money should help to make the world a better place; that means giving a portion of what you have to charitable causes.
Here are a few practical ideas to help your children learn about money:
- Set a good example. Children learn more from what you do than from what you say. For instance, if you never talk about money, they might learn that money is something to be ashamed of. If you always fight about money, the lesson could be that money causes conflict and should be avoided. If you shop without a plan, that’s a habit your children will learn too.
- Play games. Boardgames like Monopoly are a fun way to learn about money – while spending time together as a family.
- Give them an allowance and help them plan how to spend it. This will help your children to budget, compare prices and keep track of their spending, which are all excellent money habits.
- Let them help you. Involve your children in meal planning, drawing up the shopping list and comparing prices in the shops. Encourage them to help look for savings and let the older ones help you track your expenses.
- Talk about money. Discuss your monthly budget, let them ask you questions and get their inputs on things like family holidays, back-to-school planning and clothes for the new season.
The biggest gift you can give your children is to help them get comfortable with money, have conversations about it and understand how it works.