Research shows that many of our money habits start as young as age three, and that the lessons we’ve learned by the age of seven have determined our permanent financial habits. These statistics highlight
the importance teaching our children about money early in their lives, in order to give them the tools they need for good financial management as adults.
But how do we go about building solid financial foundations for our kids? There are several ways parents can instill good financial habits in their kids, even from a very young age.
Set a good example. Our kids are watching us. They see and hear everything we do and say (even when it doesn’t seem like it). Children often adopt the same or similar attitudes towards money as their
parents. If parents and grandparents model a health relationship with money, it’s likely their children will adopt a similar mindset.
One of the best ways to establish good financial habits is to be open with your children about money. Even the youngest kids can understand basic concepts about saving, spending and giving. They might
even surprise you by the depth of their understanding.
It’s also crucial to avoid sending mixed signals to our kids. For instance, most of us have probably made a purchase without consulting our spouse. If kids see Mom hiding purchases from Dad, or Dad says, “Don’t
tell Mom I bought this,” it can negatively impact their perception of money and household finances.
Show them the money. Kids need to experience the give and take of actual, physical cash. We live in a nearly cashless society: Our paychecks are directly deposited, we do most of our shopping online, and we use plastic for everything. When kids don’t see us buying things with physical money, it makes it more difficult for them to understand what an item costs or truly appreciate its value.
One way to make this “invisible” money real and tangible to our children is to give them a clear jar for saving their cash. A regular piggy bank is a great idea but doesn’t show the kids how the money grows as they save it. And let’s face it – it’s exciting for all of us to see our money grow!
Have some fun with money. Engage your kids in fun activities to teach them about how to manage their money. The grocery store, for example, is a great place to teach kids how to use their money wisely.
Show your kids how to compare brands, buy in bulk, or take advantage of sales to make their dollars stretch. Restaurants are also a good place to teach money principle. Have kids explore the menu for similar but less expensive options. Show them how they can spend less by ordering a water or skipping dessert. Teaching our kids is also a good way to remind ourselves of some of the small ways we can practice good money habits!
Demonstrate delayed gratification. We live in an instant society. One-click ordering, on-demand shows, streaming music: Everything we want is literally at our fingertips. Many of us have let instant gratification slip into our financial habits. Instead of saving for a purchase, we just go out and buy something when the impulse strikes.
It’s tempting to try to give our kids everything their heart desires but doing so doesn’t teach them about the satisfaction of reaching a goal they have saves and worked for. One idea to help kids learn about delayed gratification is to help them build a dream board. Have your children visualize what they want by drawing pictures or cutting out photos from magazines. Then talk with your kids about how they plan
to earn the money to buy it or what steps they’ll take to accomplish their goal.
Your kids may ask for a little toy or snack every time you go to the store. Even if it’s just a small item, that money can add up! Instead of making the purchase, take that dollar and put it in their money jar to help them towards the items on their dream board. This helps your children get a real sense of what it’s like to save money for long-term goals.
Money is a difficult subject to talk about for people of all ages. The best thing to do with our kids is to just start. By equipping our kids and grandkids with basic financial knowledge, we’re setting them up for
a bright future.