How parents view, manage and treat their money is something their children are observing. It is important to impart good money habits from a very young age.
Your own attitude about money helps to shape how your children think about it. Teaching positive money behaviour from a young age helps to create a lifelong awareness of money-savvy attitudes and behaviour.
It is not necessary for children to be earning their own money before they are taught money management. Rather, it can start as soon as they are old enough to understand that people use money to buy items they need and want.
Here are some effective methods when teaching children about money:
Learn by doing
Start by involving your child in your money conversations – help them to understand that you work to earn your money. Let your child see you planning your budget, paying bills, shopping carefully, and planning holidays. Explain why you are making your choices. This should kick-start a lifelong lesson to inspire them that they need to work to earn the money they spend and save.
Model good money behaviour
Children don’t learn to manage money on their own. Parents need to make a point of teaching their offspring how to make good money decisions. Say ‘no’ to impulse buying requests and teach your child how to compare pricing.
By giving your child an allowance, you can create a small reward system for chores completed. You can show them how they can earn extra income by doing jobs like cleaning the house, helping in the garden or washing the dishes. An older child can also set up a small business, selling fudge to their friends, for example.
Create a savings culture
Children most often see their parents spending money when buying groceries or paying for clothing and start associating money with spending. Teach them that money is not just for spending, but also for saving. Saving involves setting saving goals and planning; this will teach children goal setting and discipline. They will learn about delaying gratification and opportunity costs, for example, by giving up watching a movie in order to study to get high marks. Start by giving your child a piggy bank or savings jar where they can put regular money deposits to save for a future goal. Always remember to encourage your child throughout their savings journey. Saving goes hand in hand with interest, so teach your children that money can grow by investing your money. This will help them understand the value of money and how compound interest works.
Reinforce the importance of making good spending decisions
Create a budget with your child and show them that spending money affects how much money they have left after their spending. This will teach them to live within their budget and track how much money they have coming in and how much money is going out and how much money is available for saving and investing.
Our children mimic our behaviour, good and bad. Therefore we need to start talking about money in the home and looking at our own habits so that children learn to be comfortable having money conversations and adopt positive money management techniques.