As a father of five young kids, I frequently ask myself, “am I raising my kids in the best way possible?”
Any parent can relate, and I’m sure has many of the same questions and worries that I do about raising kids. There are many things as parents that we need to teach our children about and it seems like some of the biggest lessons have the least guidance.
Like the topic of money for instance.
Even as a financial advisor, this is something that I find myself struggling with. But, over the last few years, I have compiled a list of three simple tips on how to teach children about money.
Quick disclaimer: all my kids are young (my oldest is almost seven) so all my advice is geared towards young children. I’m sure as they get older, I will need to develop more advanced ways to teach them about money, but these basic ideas are good for any age.
1) Teach them the concept of money
One of the mistakes that many parents make is trying to teach our kids about a topic, when the kids have no real concept of it. I believe money is one of the main topics that we try to teach our kids about, but they have no understanding of what money actually is.
In their eyes when we want something, we just swipe a piece of plastic, or click the “order now” button – and they don’t really comprehend what happened.
So, the first tip is to teach your kids about the concept of money and how it works.
One of the tactics I use to teach my kids the concept of money is explaining that money is two main things:
- What we use to buy everything in our life, from groceries to toys.
- How we pay for our home and lifestyle.
I then pull out some cash to show them what money looks like and explain that when mom or dad swipe our cards when we go shopping, it means that money is leaving us and going to the people we are buying stuff from.
Next, I’ll talk about how I make money.
My kids love everything Disney and one of their favorite places in the world is Disneyland. So, we talk about how much I make each hour, how many hours it takes to pay for one Disneyland ticket, and then how much more it would take to buy everyone in our family a ticket.
Finding something that your kids are passionate about and using that as an opportunity to teach them the concept of money is one way to spark their interest. It’s fun to see when they start to comprehend what money is and how it is used in our daily lives.
2) Open communication
I know this tip sounds a bit odd, but if we want our children to have a healthy relationship with money, then we as parents must be open about talking to them about money.
I know of many well-intentioned parents that will never discuss their personal finances or money situation with their children because they don’t want to add stress to the kids or feel like it’s information that they don’t need to know.
If you are not comfortable with talking about money, then children will learn that money is a taboo subject, which can lead to significant money troubles later in life. I’m not saying you need to talk about the intricate details of your finances with your children, but don’t shy away from the questions or teaching opportunities that will inevitably come up.
For example, just the other night I asked my five-year-old son to go get something out of the refrigerator in our garage as I was getting dinner ready.
Unfortunately, he forgot to close the fridge door when he was out there, and my wife didn’t notice it until the next morning. By then, all the food had gone bad. Before throwing the food away I lined up all the food and had a talk with my son.
I made sure to let him know that everyone makes mistakes and that I wasn’t mad at him but that he needed to be more aware of his actions because now we had to throw away several hundred dollars’ worth of groceries away.
My son’s initial reply was, “It’s okay Dad, we have a lot of money.”
Without getting into details, I let him know that even though we are comfortable, we don’t in fact have a lot of money. I reminded him of our recent Disneyland conversation and how much it cost to replace the food as compared to purchasing Disneyland tickets.
I could’ve just thrown away the food and not taken advantage of the teaching opportunity, but instead I made sure to talk to my son about his mistake and the related financial consequences.
3) Be the example
This is easier said than done – but in my opinion, this is the most important tip of them all.
As every parent knows, it doesn’t always matter what you say, it matters what you do. And even though it may not seem like it, our kids watch everything we do and usually try to replicate it.
Do we want our kids to see us being responsible with money, avoiding an extravagant lifestyle and not making impulsive money decisions? Or, do we want our kids to see us spending more than we make, impulse shopping, and being careless about our money situation?
Our children are likely to do the same. Our money habits have a big impact on our kid’s future.
The next time you are making any type of financial decision, try and think about what your kids are seeing. If it’s something that you wouldn’t want your kids to do, then it’s probably a good idea to shy away from that.
I would love to tell you that I have done everything perfect in teaching my kids about money, but that’s far from the truth. As parents, we make mistakes and every day. It’s about trial and error as we teach our children about life and money is no different.
But, what is important is that we try each and every day to do the little things – they make the biggest difference in the long term.