Simple Ways To Teach Children The Value Of Money From A Young Age
You know what they say? Give a man a fish, you’ll feed him for a day; teach him how to fish, and you’ll feed him for life. Same goes for money. Teaching children the value of money, and that too from a young age, can seem like an uphill battle, but it’s one of the most important life lessons parents can teach their children.
Children want to keep up with their peers, but just saying ‘money doesn’t grow on trees’ doesn’t really do anything to develop their financial understanding. Instilling financial grounding, introducing the concept of financial responsibility, and learning the value of money from a young age teaches them to be financially savvy individuals, well equipped to make smart choices about money.
In fact, Straits Times recently commissioned a study about kids' pocket money. According to the results, most parents give their Primary School-aged children an average of $4 a day, with only 6% choosing not to give their kids an allowance. However, only 33% of the survey respondents think their Primary School-aged children understand saving and budgeting.
Try these 8 simple ways to increase the money smarts in your child:
1. Explain how money works
We’re living in an age when children think milk comes plastic bottles, fruits come from grocery stores and money comes from the ATM or with the swipe of a school card or credit card. Going cashless has generally become the norm and physical money is quickly becoming invisible in many places. Introduce your children to notes and coins so that they understand the mechanics of money and spending. Teach your child to understand that ATMs and credit cards aren’t means of money on demand; rather, they are connected to your bank account, and you can only withdraw what you’ve saved.
2. Basic maths skills
Now that your child understands the concept of money and the different denominations, they still can’t go very far if they don’t have the basic addition and subtractions skills to do so. And don’t worry, you don’t need to wait for school to teach them how to do maths – start then off small and simple at home yourself.
3. Instil the value of earning a dollar
Almost every parent is in favour of pocket money, but are we really instilling the value of earning that money? When children earn money rather than just being handed it, it’ll mean more as they would have made an effort to earn it and they won’t take having money for granted. Earning money for simple chores such as cleaning the car or doing the dishes, and then saving that money to buy something is also a good lesson in delayed gratification and usually avoids children growing up to value materialistic things.
4. It’s okay to say NO
Depending on the age of your child, introduce them to the financial expenses families usually have such as school fees, utilities, medical bills, groceries, insurance, etc. This will help your child develop a broader perspective of why money needs to be spent wisely, and since it’s finite, sometimes not all their demands can’t be met, as needs are more important than wants. It’s better to have a few disappointing experiences as a child and develop patience rather than grow up without understanding the importance of delayed gratification and budgeting.
5. Start with an allowance
Starting at a young age with a small allowance helps reinforce the fact that most people have a fixed amount of money to work with, and that it will run out at some point unless they make good decisions to get the most value out of their money. However, it’s hard to save big when you’re small and only getting a tiny allowance. If your child is really serious about saving for something, don’t quash their enthusiasm. Offer to match their savings dollar for dollar so that they doesn’t lose interest in seeing the point of saving money in the first place.
6. Start saving
Encourage your child to the ‘spend half, save some, donate some’ philosophy already. Decide together what the ratio should be depending on the age of your child. Children understand best when the lesson is visual, so start simply by having 3 jars (or 3 piggy banks) – with one for saving, one for spending, one for giving. As expected, the saving jar will grow slowly, but the spending and giving jars should have more movement. Make sure your child actually donates some money and spends some money, understanding the importance of saving for a rainy day or unforeseen circumstances.
Also remember that saving towards a certain goal is important for motivation, so keep track of how much they have saved and encourage planning ahead for special purchases. If your child is old enough, perhaps consider opening a savings account for them already in their name too.
7. Make wise choices about spending
Taking children grocery shopping is a brilliant way to demonstrate the power of choice and not getting swayed by attractive packaging and labels. If you can teach your child to wisely choose this not that and make value-based decisions to make your dollar stretch further, then they’ll be better able to prioritise and spend on things that are more important rather than become spendthrifts. And they’ll be happier and financially more independent adults too.
8. Don’t bail them out
Just like adults, the sooner children realise that there are consequences for their decisions, the better off they will be later in life. Teach them to understand that once they buy something, a refund or exchange may not be possible, and that they have to live with what they have bought if they don’t have enough money saved up to buy something else. As parents, it may be hard to see them upset, but don’t bail them out of the situation and give them some of your money to fix the situation. Once they learn that lesson, choosing wisely the next time will be much easier.
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