“Mom, I want that!”
“Dad, can I get this?”
“Why can’t I just get a new one?”
Ever heard your kid say something similar?
Children typically learn from observation and imitation more than any other method. As you do your best to make sound financial decisions, your kid will see—and often imitate—your commitment to being smart with money. And you can begin talking to them about being fiscally responsible at any time. But once you decide it’s time to start teaching, what should you emphasize?
Lesson #1: Money has value.
One of the first lessons to teach your kid is that money has value. Whether you have thousands of them or only a few, one dollar is one dollar. It has the same purchasing potential regardless of who’s holding it.
Lesson #2: Understand the difference between “wants” and “needs.”
While this may be a different discussion depending on your situation, it’s important for your kid to understand that not everything he or she wants is needed. For example, you can make the case that food is a “need,” but candy is more of a “want”—even though it’s technically food. As your child gets older, those lines get more difficult to teach so be sure to make this a focal point when they’re young.
Lesson #3: Patience is important when it comes to money matters.
While it’s enticing (and easy) to purchase a “want” right now, it’s not always the smartest. Take for instance a new gaming console or smartphone that was just released. Is buying it the first day a smart move? Probably not. New technology can often be very expensive. But if you’re willing to wait a few months before you purchase, you could potentially save money while still enjoying the same product.
Lesson #4: Providing an allowance.
Giving kids an allowance is an age-old parenting trick. But be weary that this can cause issues depending on how you go about it. If you want to teach the concept that “work equals money,” then teach that lesson. If you want to teach lessons about behavior or grades, stick to that method. Try not to mix the two to avoid confusion. Regardless of how your kid earns the money, make sure it works for them so they understand the value and concept of saving—and spending—money.
Lesson #5: Allow them to make decisions about their money.
An important lesson in teaching your kid how to be financially responsible is allowing them to make their own decisions with their money. One of the more difficult parts of teaching is when it’s time to take a step back and watch your child use what you’ve taught them. So when your kid asks for something, simply respond with, “It’s your money.” Then it’s up to your child whether the item they’re purchasing is worth the money.