“Mum I want that” Little Kimberly pleads as she points at a huge play house while shopping around with her mum. “I don’t have money dear” her mum firmly responds. “Let’s go take money at the ATM.”, Kimberly suggests.
Sadly, many kids’ financial knowledge is limited to the idea that money comes from ATMs and that you just need to swipe a card to buy something. As adults we know it’s a bit more complicated and we struggle to teach our children how to manage their funds. If you made money mistakes as a young adult, you want to prevent your kids from going through the same thing.
Most of us learned about finances from our parents. If your parents were thrifty and taught you well, congrats! If you finally see the light after repeating their mistakes, take some time to make sure your kids do better. It does not have to be formal training—remember kids learn best from what they see and hear. In fact, entrepreneurs like Warren Buffett and Bill Gates are helping to educate the next generation though the animated series, Secret Millionaires Club. To get parents involved, here are lessons on teaching money to kids to get you started.
- Money is not happiness
One of the most crucial lessons to teach kids about money is that having it doesn’t guarantee happiness. To prove the point, plan a family activity that costs little or no money. Take a hike, plan a picnic, watch a Little League game. Teach your family that you make your own happiness and it doesn’t have to cost a thing.
- Money doesn’t equal success
Use examples that kids understand. Give examples of people who have made a lot of money but their life is far from successful. Use people you know who are great parents or loyal friends as success stories for your kids. Teach them that integrity is more valuable than riches.
- Work for it
Working for a goal makes reaching it that much sweeter. Negotiate with your kids—for example, offer to pay half for that new video game if they save up their allowance to pay for the rest. It will not take long before they catch on.
- Live within means
Give your kids an age-appropriate allowance, set a few ground rules for its use then back off. If your child blows it all the first day, they will have to remain penniless until the next pay period.
Giving is one of the most important lessons to teach kids about money. Encourage your child to give a percentage of their allowance to a charity or to use some of their money to buy siblings or friends a gift. Set a good example by doing the same.
- Being Grateful
Remind your child that what you need and what you want are two different things. Spending an afternoon volunteering at a food kitchen could be a real eye-opener. Remind your kids that there will always be those who have more, but they are far outnumbered by those who have less.
Teach your child to plan for the future. Set up a savings account with the first allowance payment.
Make sure your kids know the difference between an investment, like a mortgage, and voluntary debt, like credit card spending. Everyone has to have a place to live but nobody really needs 14 pairs of sneakers or. If your kids are smart, they will catch on.