It’s Not On The House: Raising Financially Responsible Children
For time immemorial, parents have done their best to equip their children with the skills they need to thrive in the future. For modern parents, financial literacy is a critical life skill and essential for making smart money decisions. By understanding financial concepts, you can manage a budget, avoid debt, save for the future, compare products wisely, and build financial stability. This knowledge can improve your quality of life by supporting goals like homeownership or higher education, and it can provide a safety net during emergencies. Simply put, financial literacy is the foundation for a secure and prosperous future, so teaching kids about money early sets them up for success later.
Start Early with Simple Concepts
As early as seems appropriate, introduce basic financial concepts through fun and practical activities. Help children visualize saving by encouraging them to put coins and bills into a piggy bank or clear jar, watching their savings grow over time. Teach them to identify different coins and their values through games and sorting activities, building their understanding of currency. (See The Coin Counting Book in the Read! section below.) Involve them in real-life situations like counting change at the register to reinforce how money works in everyday life and enhance their math skills.
Lead by Example and Discuss Financial Decisions
As we all know, children learn by observing their parents (for better or worse), so demonstrate good financial habits in your daily life. If you're at the store, explain why you're choosing one product over another based on price and value. Show them how you budget for groceries and other household expenses. When appropriate, discuss financial decisions openly, so they understand the pros and cons and the thought process behind making a financial decision. Use real-life examples to show how money is earned and spent, emphasizing the difference between needs and wants.
Learn to Earn
The debate rages over allowance and chores and the relationship between the two. There is no right or wrong answer, just do what works best for your family. One option might be to pay your children for completing extra chores, like vacuuming the car or sweeping up leaves (extra chores = chores that go beyond their predetermined regular responsibilities, such as setting the table or cleaning their room). Another option might be to create a chore chart and pay your children an allowance for the completion of those chores on a weekly basis. In either example, this transactional model helps children appreciate the effort required to earn money and the satisfaction that comes from hard work.
Teach Budgeting and Encourage Saving
Once your children have money, help them create a basic budget and divide their money into categories: spending, saving, and giving. Encourage them to set financial goals, such as saving for a new toy. Open a savings account together and explain how interest works. Two words, free money. Matching their savings contributions can be a great motivator. What did I say about free money?
Read!
Reading is a powerful way to introduce financial concepts to your children. Here are some excellent books to read together:
Alexander, Who Used to Be Rich Last Sunday by Judith Viorst - This book encourages discussions about money management, impulse control, and the significance of delayed gratification.
Bunny Money by Rosemary Wells - Max and Ruby learn important lessons about money management and making wise financial decisions.
A Chair for My Mother by Vera B. Williams - A heartwarming story that introduces children to the concepts of saving, patience, and determination.
The Coin Counting Book by Rozanne Lanczak Williams - This book uses vibrant illustrations and engaging activities to teach children about counting money.
Lemonade in Winter: A Book About Two Kids Counting Money by Emily Jenkins - Pauline and John-John learn about counting, earning, and saving money while running a lemonade stand in winter.
Sheep in a Shop by Nancy Shaw - A fun story that introduces the concept of saving up to buy something and the idea that things in stores are not free.
Raising financially responsible children requires patience, consistency, and a willingness to lead by example. By introducing financial concepts early and involving your children in spending, budgeting, and saving, you can teach them the valuable skills they need to make sound financial decisions throughout their lives. Your time now is an investment that will pay dividends later.