Five Tips on How to Help Your Children Develop Smart Money Habits
by Carolyn Lee May 16, 2022
Most Caribbean children are introduced to money during childhood by observing transactions their parents or other adults make in their presence. They may also interact with cash at school, piggy bank savings, buying lunch or items at shops at their parent’s request. Although they realise that money is a currency used in exchange for goods or services, they need help with financial literacy.
It is essential to teach children about money early as it provides them with knowledge and helps develop money management skills they can use as adults.
So, if you are ready to talk to your children about money management, we’ve got a few tips to help start the conversation.
Introduce the concept of needs versus wants.
Children are accustomed to getting many of their desires catered to by those around them. So, explaining the difference between needs and wants can guide their aspirations. Use items in your home to support your arguments for needs and wants. Food, clothing, shelter, healthcare, and education are some needs that should be at the top of the list. While wants like fast food or the latest tablet can wait. You can test their understanding by asking them to tell you some of the things in your home that would classify as wants or needs.
Make learning about money fun.
Children can start learning about money at the pre-school stage. You can use fake currency in games or make-believe where they are racing cars or dressing up dolls. Discuss the cost of cars or dolls’ clothes and share what you can afford to purchase. This activity will allow them to understand that some items are more affordable than others and encourage them to leave what they can’t afford. You can also include real-life experiences by taking them to the bank and explaining what is happening if they are old enough to understand.
Introduce simple financial terms early.
Talk to your children about money, saving, budgeting, and financial goal planning. Use some of your routines to support what you’ve shared, like having them help plan the budget for groceries. Take them grocery shopping with you where they can see how you choose the items. Explain the different prices and how selecting affordable products that may be like others can save money. You can also get them to start practicing saving in a piggy bank, so they develop the habit of putting money aside for later.
Let them practice with real money.
As your children get older, please give them a reasonable allowance to practice managing money. Let them save part of their allowance towards specific items or events they want to purchase. There is also an opportunity to introduce them to investing by offering to match what they save. Practicing investing can incentivise them to reserve instead of spending all their money on instant gratification. It will also help them to practice self-discipline when they meet their target.
Model good money management practices.
Children emulate a lot of the habits they see around them. It is crucial to model healthy habits, even with money. Make money an informative but fun part of your conversations. Talk openly about the benefits of saving, investing, budgeting, and doing research to improve financial literacy. Let them observe you choosing needs over wants for things you desire. You don’t need to be extremely strict with spending. Treat yourself at times, so they see how investing, saving, and budgeting can produce other rewards.
The conversation about healthy money habits will help your children make better financial decisions when they are adults. If you aren’t confident about your money practices, a financial planner can guide you. Search our Find Yello listing for financial houses, planners, or consultants near you.
Sources: Forbes, Investopedia, LGFCU, Money Helper, Teachwire, and Today.