When my oldest son was four years old, he asked my wife to buy him a book. She told him “no” because she didn’t have any money with her. In his sweet preschool voice, he declared, “Go to your bank, Mommy. It gives you any money you want!” After sharing a laugh at the anecdote with my wife, I began to realize that in the depths of raising three children under four, we had not started addressing money. This was concerning to me because I’d read a study by the University of Cambridge which stated that money habits in children are formed by age seven – that was just a few short years away.
Parents are the number one influence on a child’s financial behavior, so it’s essential we discuss money starting at an early age. Here are some tips, concepts, and activities to use to teach your children about money – from toddler and beyond:
The clear jar allows young children to see the money and how it grows as they continue to save. Discuss the changes in the clear jar and make a big deal as it grows.
If you are playing restaurant or grocery store with your child, use the pretend money that comes with it. This shows the concept of accepting a good and paying for it.
When picking out a toy, say to your child, “This costs $7.” When it comes time to pay, have your child count out the money and physically hand the money to the cashier.
Taking your child to the bank and including them in opening a savings account is a great way to teach the concept of a bank and savings. Or in the case of my child, teaching him the bank does not just hand out money!
The magic of saving money actually making you money is a great lesson for kids to learn. The calculator on Investor.gov is a great tool to show your child an estimate of how much money they will accrue over the years from just a small initial investment.
We’ve all been in this situation: your child eyes some shiny item in the store and asks you to buy it. It is not a matter of whether you can afford the item or not, but rather the circumstances. Did you set out specifically to buy a new toy, video game, or book for your child? If not, resist the impulse buy so you model responsible and purposeful spending.
Recently, my son came home from a play date asking if we would install a TV in his room, because his friend has one. We explained to him that the two televisions in our home are more than enough to meet his wants for entertainment. It is easy for children, teenagers, and adults to get caught up in the comparison trap, but it is easier to feel contentment if taught at an early age.
Introduce the importance of philanthropy to your children early, and they will likely become eager volunteers and donors.
My oldest son had his eyes on a specific pair of basketball shoes for quite some time, but even if he split the cost with us, the shoes, in our opinion, were too expensive for his age. Over the course of two months, he did weekly cost comparison online shopping, and finally, he found the shoes 50% off. His diligence in finding cost comparisons saved him money, avoided an impulse buy, and showed him that persistence pays off.
Having your teenager develop a budget teaches an understanding of how much money they have, where it goes, and how to plan to allocate those funds best. There are several apps such as Tip Yourself or Every Dollar to keep them on track.
Discussing the cost of college around ninth grade is important so your teen is realistic and prepared when making decisions about their future.
There are mixed opinions on teenagers having a credit card. If you decide to go the credit card route, be sure to discuss the credit card traps, responsible use, and the importance of paying it off in full every month.
Whether it is a part-time summer job or year-round, expecting your teen to work establishes independence in making their own money. It gives them the responsibility of budgeting and saving, and they will gain a better appreciation of money.
Money is an inevitable fact of life, and educating your child on money matters is important. While the earlier is better, it is never too late to start. We all want the best for our children and developing a positive, informed, responsible, and strong foundation with money management will only aide in their future success.
JP Williams is the Founder of Pillar Wealth Group who lives and works near Columbus, Ohio. JP founded Pillar Wealth Group with over 17 years of experience and specializes in financial planning, retirement planning, investment management, risk management, college planning, and estate planning. Contact us today to get started with your financial wellness journey.