If you want your kids to stand on their own and not live in your house till they are 40 then consider teaching them financial literacy.
But when exactly should you start teaching your children about money?
You can’t ask them to get a job if they are only in class three. However, you can employ different methods of teaching your children about money as they get older. You could start teaching them about financial literacy as early as 5 years old and keep changing your approaches up until they are young adults.
Knowing how to handle money will ensure your child doesn’t grow up to be an adult who gets confused when they see a lot of zeros on a cheque or doesn’t know what to do when they receive a bonus at work and they end up spending it on something they can’t remember.
Here are some ways you could employ to teach your children about money.
Read Also: Fun Ways to Teach Your Children About Money
You could introduce money talks as early as 5 years old, tell your children what money is for and how money is earned through employment or owning a business. Introduce words like spend, earn, and save to them and explain their role in our daily lives.
Jennifer Seitz, director of education at Greenlight, an app for banking and investing for kids and teens said in a past interview with CNBC that money is a practical tool in life, so don’t let it be a mysterious concept. Children are developing their ability to focus and prioritise at an early age, they are also getting to understand the decisions you make when you choose one thing instead of another.
A fun approach to teaching your 5-year-old about money is to read stories about money that are specifically designed for kids. You could read story books like If You Made a Million by David M. Schwartz, which teaches 4- to 8-year-olds about money and counting with Marvelosissimo the Mathematical Magician.
I am sure we have all seen those commercials where a child is screaming out of control at their parent because they want them to buy something for them. Most times the parent in the advert stands awkwardly and smiles to passersby while attempting and failing to control their child.
Children should learn from a young age that what they want isn’t always what they need. The next time you go to the supermarket with your kids, explain their wants and needs to them.
Needs are what you put in the trolley first, tissue, soap, unga, picking those things first shows you are responsible with your money. You could talk to them about making a shopping list and let them know that there should always be a plan for how money is to be used. Let them look out for discounts too!
As your child becomes older, they will get more and more inclined to follow trends and whatever is hot and new online. They might even reach a point they are constantly asking for money to buy clothes or attend events with friends. These things are not bad if your child does them on occasion but if asking for money turns into their anthem, it might be time to seat them down and discuss ways to earn money.
You could give them real-world experience by having them work during holidays. If your child has hobbies like making bracelets perhaps they are budding entrepreneurs, make them a stand and see how that goes. Alternatively, you could give them work and teach them about taxes and savings in the process. You could open up a savings account for them and teach them about saving money. Opening up a savings account will help you teach your child about planning ahead as well as setting goals for their money. Having a savings account will help your child stay focused on their priorities, teach them to save up till they can afford the things they want as well as show them how their money can grow through compound interest.
If your teen loves certain brands so much, why not have them invest in them by buying up stock? You could sit down with your teen and explain how stock works and why it is important for you to start investing at such an early age.
Even though you are the one who will be paying for everything your adult child will be getting, having them prepare a budget to understand where all the money is spent is still essential. Have them create a budget and also have them include a part where they save money. Having them start saving now will ensure they have that rainy-day mentality if they ever fall into any future emergencies. Apart from earning, saving, and investing. Children need to learn how to borrow and manage debt responsibly.
Unless you and your child love numbers and percentages, talking about taxes isn’t something you would put on your list of favourite things to do. It's important for your kids to know what taxes are and how they work, it saves them the shock for when they get their first job.
When is the best time to introduce taxes to your kids? That’s entirely up to you, however here are a few tips you could use when talking to your children at whatever age.
If your child is still fairly young, let’s say 5-10 years old, you could tell them about how you share a certain percentage of money and keep the rest. You could even give examples of some of the things your taxes pay for, like the roads.
As your child grows older, they will want more things as earlier stated. If your child wants things, have them work for them and earn their money. This could be a great opportunity to show them how taxes work. Whether they get an allowance or have to work for their money, introducing taxes to them now will help them get a taste of how the real world works.
When your child becomes an adult, you could introduce them to tax documents. Take them through the deductions and explain how they work. By the time your adult child lands their first job, they should be able to understand how taxes work and fill returns with ease.
No matter when you decide to introduce your child to the world of taxes, it's a great opportunity to teach them useful skills for the future. This will lessen the number of surprises your children will encounter and better prepare them to manage their own finances in the future.
Make the most of every opportunity that arises to teach your children about money, and to incorporate money lessons into your day-to-day activities.
You might think you are not ready to talk to your children about money especially if you have struggled with handling or controlling your finances in the past. Holding off on teaching your children about money until your finances are in order, may be a disservice to your child.