The key to living a balanced life is managing your money well. It is one of the most basic and necessary life skills that all of us need. However, most of us don’t know where to start when teaching our kids about money. The most complicated task is to decide which age is right to educate children about finance and what to cover.
All the below is for information purposes only. Please always seek professional advice before acting.
Therefore, we are going to share some tips on how to teach children money skills from a young age.
1. Teach Maths with the help of sugar packets
Sugar packets are an easy method of teaching basic maths skills in early childhood. Parents can use the tiny sugar packets to introduce simple maths equations such as 2+2 and 4-1. Then they can slowly use this tactic to frame questions around money.
For instance, give your child a specific number of sugar packets, telling them that each white packet represents money and the brown sugar packets are the monthly electricity bills. Then ask them if, after paying bills, they have money left to buy a new toy.
Make learning engaging and fun. This way, your child’s understanding of money starts developing without even them knowing it.
2. Talk and promote a healthy attitude towards money
You can always teach practical lessons to children about money. A good place to start teaching your children about money is to encourage them to have a healthy attitude towards money. You need to show them what money is (i.e., a tool), what is it used for (i.e., we use it for a purpose and don’t earn money for its own sake) and that it is very critical to be in control of it, instead of being controlled by it.
3. Set up and play pretend store
A smart activity to use for teaching children about money is playing pretend store with your children. For starters, let your child pick a range of items from the house to put in the pretend store. Then, have them arrange those products on sofas or shelves, just to make it look similar to what they see in a real store.
Next, help them price each item with the help of paper and crayons. The price of each product in the store does not have to be accurate. But make sure to keep the prices lower, for example, between £0.10 to £1.00.
Finally, you need to give your children a few pounds and ask them to go shopping.
You should do a variation of the game and switch roles which means you shop while your child works at the register. You can teach your children about money habits by having them make choices within their means.
Throughout this play, you need to talk to them about the savings (for example, £1 off a single item and £2 off when you purchase two items, etc.) and tell them why it is essential to look for savings before going shopping.
4. Allow your kids to see how you plan your budget
Kids are observant learners. They learn by observing and copying their parents. Why not use this learning to teach them some skills? When your kids reach the age of middle childhood and up, this is the right age to teach them a little advanced level of Maths. If you write your budget somewhere or a mobile app to keep finances on track, allow your children to see the time and the effort you put in to managing your money.
They are likely to remember watching you make these decisions when they make their own future decisions.
Let’s discuss how you can achieve this.
Trips to grocery stores
When shopping, be open about your decisions, tell them why you chose an item on sale over one that is not on sale. Talk to them about why these saved pounds are important for your budget.
Visit the ATM
- Explain to them that the money coming from the ATM is coming from your bank account (money that you own and is not a loan or from a credit card).
- Discuss how much cash you are taking out and what you will use this money for.
Your kids may ask you a lot of follow up questions, such as if you have more money in the bank or how you will get more money. These are good questions to normalise teaching children about money.
5. Talk about budgeting, using their allowance
Sometimes it is OK to buy our children everything they want. But you can use this as a learning opportunity. Don’t be scared of discussing the budget with them and how money is a finite resource that should be used wisely. Involve your children in talks about finances and budgets when they are 10 or 11 years of age. Make them understand why you can’t afford to buy them something they want instead of just saying No.
Most parents give children a weekly or monthly allowance to spend. This is a great opportunity to teach them about managing finances. You can tie all or part of their allowance to different chores or good grades, which teaches them goal-setting and work ethic. Talk about savings and budgets and how they can decide what to do with their pocket money. This teaches them about financial responsibility and reinforces them to spend money more wisely.
6. Create a kid-sized budget
- Even if the numbers are small, the budgeting will still be relative. For instance, if your kids earn £5 per week in allowance, you can help them plan the money in their budget. Your kid’s budget for £5 per week may look something like this:
- £2 for spending money
- £2.50 goes towards savings
- £0.50 they can donate to a charity of their choice
Learning to make a budget endorses money skills that benefit your children for years. You may like to encourage your children to donate to charity to help them learn the importance of giving back.
7. Make them practice money handling with an app
It is important to talk to children using tools that interest them. Since this generation is all about phones and apps, use an app to help them manage money.
With an app, kids can keep an eye on their pocket money while deciding on where to spend it, and it gets them familiar with pins numbers etc. This way, they learn to manage and budget their money. They can get used to checking their account before they buy something. They can also keep up with how much they are saving up. As a parent, you can create a spending limit on the app and get a notification to keep a check on how your child is spending money.
8. Help your kids learn to save up to buy things they want
Since it has got easier to ‘buy now and pay later’, kids need to learn how and why they need to save their money. When your child wants to buy a specific toy, discuss whether that toy is worth it. Then ask them to wait for a few weeks, save their allowance and buy that toy. This way, they get the toy they wanted and learn the value/reward of savings and money. Using this exercise, your kids will learn to assess what they want, how to buy it and shop for the best deal.
9. Trust kids with the responsibility of choosing how they spend money
Finally, do not underestimate your kids. Don’t be afraid to give them responsibility. If they are old enough to understand the concept of budgeting, then allow them to decide where to buy things they would like.
For example, on holiday, talk about your holiday budget openly and make it clear to them that it is a finite amount. Allocate each child a ‘decision day’ and this way they can decide on where to spend their money like going out for dinner or an activity.
So, there you have it, we have given you nine ideas to teach your children about money. Help them grow up equipped with confidence and tools to manage their money.
All the above is for information purposes only. Please always seek professional advice before acting.
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