If you’re a parent, it’s in your best interest to positively shape your child’s relationship with money.
Not only will this help instill in them the value of finances, but it’ll also do you favors in helping you reach your financial goals quicker. After all, if they’re on board, you’ll no longer be spreading out as much money on toys and luxuries for them.
That said, teaching your kids to budget isn’t as easy as explaining the concept behind money saving. Educating your child requires an age-appropriate and relevant approach—one that can resonate with them more strongly than the impulse to spend for their wants.
Then, you may wonder, how do you educate your children about saving and budgeting at an early age?
Let’s delve into the basics and explain the concepts behind teaching your children about handling their finances.
Let’s start!
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1. Make learning fun and age-appropriate
Explaining financial literacy to a 6-year-old in adult language is not the most effective approach. Concepts will fly over their head and they’ll have a difficult time processing it all.
Instead of going that route, start a conversation about money in kid-friendly language. Differentiate what their needs and wants are to them and show examples that they can resonate with.
For instance, teach them that buying a brand new toy is classified as a want while buying a cafeteria meal or grocery is a need.
Furthermore, you should try to make learning fun as much as possible. You can use educational apps to do the work for you, but if you don’t want to rely on screens, then consider playing with them through roleplaying “Store” or playing board games like Monopoly.
These aforementioned techniques can make them digest complex concepts and have fun doing so—bolstering their desire to save money. They’ll also likely retain the information you taught them more easily when the educational material is fun.
2. Show your kids where money is spent
Once you’ve laid the groundwork of financial literacy for your child, enhance their practical knowledge by teaching them where their money goes.
While you don’t want to detail every specific part of your expense breakdown, you can tell them of the most prominent costs around the house. This includes the rent, groceries, and utility bills.
Teach them that these things aren’t infinite resources—you need to earn money to be able to get these things. Your transparency on the matter helps them understand the flow of money and the costs associated with daily living.
By showing them these real-life applications, you can more easily get them to get into the saving mentality—which can further strengthen their financial literacy and independence in the future.
3. Explain delayed gratification
One child-friendly way of teaching delayed gratification is by conducting the Marshmallow test on them.
This involves placing a marshmallow in front of them and explaining that if they can resist eating it for a certain period (usually 15 minutes), they will receive a second marshmallow as a reward.
This simple experiment not only illustrates the concept of waiting for a bigger reward (delayed gratification) but also introduces them to the idea of self-control and patience in achieving greater benefits.
You can use this test as an educational experience for your child to save money for a bigger reward in the long term.
If your kid is particularly agile in math (or if you’re willing to teach them basic math) and is working towards reaching a certain goal, you can use a savings calculator to give them a practical timeline on when they can make a purchase (click here for more information on this tool).
4. Involve your kid in money decisions
If your kid is old enough, you should consider involving them in crucial money decisions. This can help them learn how to plan their finances and feel the brunt of their financial decisions.
For instance, you can give them a budget for snacks that they can buy in the grocery store. Instil in their heads that sticking to the budget is something they have to do—going over the budget is not a possibility, even if it means missing out on one or two food items that they’d like.
Involving your kid in these types of decisions can help them understand the concept of trade-offs and sacrifices. This concept helps them become more responsible with how they spend their money, which can pave the way for a better money mindset in the future.
5. Pay kids for chores
Another great way to get kids to understand the value of money is by assigning them chores around the house.
Of course, you’ll want to keep it age-appropriate, but try to keep the chore moderately challenging so that they can truly understand the value of hard work. By doing so, you’ll teach them the value of hard work.
For instance, for early elementary-aged kids, allow them to mop the floors or hose down the car in exchange for an allowance. For teens, chores they can take up include cleaning the bathroom and mowing the lawn.
By teaching them to physically work for their cash, they can value the money they’ve earned and become more mindful about how they use their allowance.
6. Help visualize saving with a glass jar or piggy bank
Piggy banks have been used to illustrate the effectiveness of saving money for children and teens since time immemorial. Well, actually, the piggy bank has been around since the 1500s, but for the modern generation, that’s pretty much the same thing!
The length of time that this tool has been around is a testament to its effectiveness in helping families and children save their money tangibly.
By physically depositing coins or bills into a piggy bank (or clear jar), children can see their savings accumulate over time, turning the abstract idea of saving into something concrete and understandable.
Furthermore, piggy banks reinforce the concept of patience and discipline to reach one’s goals. It’s a slow and steady way to reach financial goals and one that can be satisfying once the time comes for you and your kid to open everything up once the jar is all full.
7. Teach them about the harms of overspending
Teaching the value of money to your kids is one thing—and, make no mistake, incredibly important.
That said, it’s also important to lay out the opposite and let them understand how belligerently spending money can be just as dangerous.
To illustrate the harms of overspending, teach them about the consequences of running out of money for essentials or failing to have savings.
Be sure to use age-appropriate examples. You can teach them, for instance, that by spending all their allowance on toys, they won’t have enough of an allowance to spend on a grand birthday celebration.
Additionally, you can help them visualize the real threat of overspending by setting up a savings account for them and showing how quickly money can disappear with seemingly small and infrequent withdrawals.
By showing them the harm of overspending, they’ll more easily grasp the risk of failing to save—which can help them manage their money wisely.
For more on this topic, check out the full Saving Money collection
