Teaching Kids About Money

Kim Borwick reports:

"Teaching kids about money when they’re young lays the foundation for responsible money management later in life. Children whose parents emphasize the importance of financial literacy and encourage them to spend and save thoughtfully develop a healthy perspective on money. It’s never too early to begin teaching your kids about money. But doing so is not as straightforward as you might assume. Some parents don’t feel confident enough in their own knowledge of financial matters to be comfortable teaching their kids about money. Others believe it’s inappropriate to burden young children with conversations about money or think, mistakenly, that children are too young to understand financial concepts...Children as young as 3 years old understand basic economic concepts, and by age 7, kids have developed permanent financial habits. This is a good time to start explaining that material goods cost money. Give them a piggy bank, or better yet, help them establish spending and sharing jars, which will allow them to see what happens to their balance depending on the decisions they make. Talk to your preschooler or kindergartener about sharing with others. Show them how to set financial goals and how to meet those goals. And remember, parents have the greatest influence over children’s money habits, and at this age, your kids are looking to you to set an example and guide them...At this age [6 to 14], you can let your child help with the grocery shopping, walking them through your decisions to shop at certain stores, seek coupons and sales, and select certain brands according to pricing and your budget. You should also begin discussing big-ticket items with them. Koblinger included an example of how a friend of hers used car shopping as an opportunity to teach his 10-year-old 'smart ways to save, how to see through clever marketing, how to negotiate prices, and how to avoid the pitfalls of loans.' You can even teach children this age about compound interest, using real data as opposed to trying to explain the concept in the abstract...By the time your child reaches high school, he or she should be capable of understanding more sophisticated money management concepts and have a level of financial literacy that includes knowledge of earning, saving, spending and sharing at the very least. Credit card companies target college students, so you’ll also want your child to be aware of the dangers of maxing out credit cards, how interest works, credit limits and the importance of building credit responsibly. Talk to your teen about the value of money. This includes emphasizing the difference between wants and needs and making sure they know your values when it comes to money. These conversations won’t be easy, especially when they see their friends wearing designer clothes and whipping out their parents’ credit cards when they go out. Just remember, you’re not alone. Every parent who cares about their child’s financial well-being and wants to instill positive values must say no to their kids at some point. And, just as your parents told you long ago, it’s for their own good...There’s a fine line between preparing children to be financially responsible and tarnishing their relationship to money. Miata Edoga, president of financial education company Abundance Bound, told Parentology, 'We don’t want our kids to be afraid of spending, be afraid of managing credit. We want them to feel confident in their ability to negotiate successful financial lives, to come at money from a place of power, rather than fear.' The information age ushered in new media teaching platforms and introduced the world to the 'digital native.' New educational apps for kids are launched regularly. These technological tools use interactivity and gamification to make financial concepts fun for children and teens. In addition to educating kids about core personal finance topics, these apps simulate the digital-era experience of using credit and debit cards, mobile payment methods, digital wallets, online banking and one-click shopping...While it can be a bit intimidating to teach kids about money, the rewards for both you and your child will far outweigh any frustrations the lessons may cause. And, fortunately, now more than ever, parents have a host of resources at their disposal, from apps and simulations to good old-fashioned discussions and real-life scenarios. The most important thing is to convey the need for smart money management and allow your kids the chance to practice these skills in their daily lives."