Studies have shown that obtaining basic financial knowledge early in life can increase the chances of being financially successful as an adult. If you have kids, you should have a plan for how you intend to teach them the money skills they will need throughout life.
Can kids of any age learn smart financial habits?
Kids as young as four to five can start learning a few basic financial skills. And the sooner you start the easier it is to build upon those skills. Kids are learning about money by the financial behavior you are modeling so it’s probably better if you help steer them to the correct financial habits.
What is the most important concept to teach?
The most important concept is to teach them the difference between a need and a want. And especially how important that it is to put needs first when it comes to spending. When people can clearly distinguish between a need and want, they are much more likely to make the best financial decision for their situation.
What are ways parents can teach financial habits?
Start with the simple concept that there are only three things you can do with money - spend/share/save. Then, help them set up ways to do that with any money they receive and also talk about how you are doing all three of these financial activities with your money.
How can parents model financial appropriate behaviors?
Involve them in financial activities such as grocery shopping. Even kids as young at 7 – 9 can start to understand the basic concepts this activity provides. Show them how to make a list, take them shopping and explain how you comparison shop for each item, show them how to use coupons and talk about how you might want that candy but it’s not on your list so you aren’t going to buy it this time.
What are other ways to teach good financial habits?
One great tool is the keep the change game. Give them money for something they want, for example ice cream and tell them they can keep whatever change is leftover for themselves. You will quickly know what type of spender you have. The one who gets what they should, 1 scoop, or the one who spends it all gets 3 scoops.
Are allowances a good teaching skill?
Yes, if there is also financial responsibility that goes with it. If you give your children an allowance, then expect them to use their allowance for certain financial obligations like entertainment or gifts for others. And using the “spend, save, share” concept, you can teach them to save for longer term purchases on a monthly basis.
When your child is 21, what are the basic financial skills or knowledge they need to have mastered?
The 4 most important are:
- Understand the difference between needs and wants
- Basic budgeting skills
- Established saving habits
- Good spending behaviors