Disclaimer: This post is sponsored by PSECU, a Pennsylvania-based credit union.
If you want to start your kids on the path to financial literacy, beginning early is key. Many people form their essential attitudes about money before leaving primary school. It’s really important to help give little ones a money education to help develop healthy attitudes toward spending and saving to teach kids the value of money. We’re always talking about the value of money with our kids and making sure they know we have to earn it to be able to spend it.
How much you teach depends upon the age of your child as well as their developmental level. Some kids mature faster than others. However, you can use the six tips below as guidelines for which ages to institute certain financial lessons. Here’s some ideas of what you can do.
Teaching Kids About Money
When your children first start toddling around, they begin forming their attitudes toward money. This marks the perfect time to teach them about managing their assets properly. How can you do so? Easily — bring back the old-fashioned piggy bank. Better yet, make that three.
The first piggy represents fun — if you never let children spend a penny on something pleasurable like a sweet, they’ll grow up associating money with feelings of deprivation and resentment. The second piggy represents a short-term savings goal to spend at year’s end, such as on a new gaming console. This teaches children to budget for what they want. The final piggy is for their Uni savings — this will eventually equate to their retirement kitty.
2. Play Shops During the Preschool Years
During the preschool years of ages 3-5, children begin learning to perform basic counting tasks — and they adore this game. Therefore, teach kids that purchasing things takes money and comes with opportunity cost by playing shops.
Let children pick out items around the house and “sell” them to family members. This teaches them how to count correct change, but they also learn that once you spend money on one item, you have less to spend on others. It provides a firm foundation for understanding opportunity cost, playing shop never gets old in our house!
3. Grocery Shop During Primary Years
With this foundation, you’re ready to accelerate your child’s learning to the next level once they reach ages 6-9. While making your shopping list, explain to children how much you have budgeted for groceries. Explain the average costs of certain items, and let them help make the list.
At the store, hand your child the list and help them stay in budget. Reinforce opportunity cost by showing them how, if they save money on needed items by purchasing a cheaper brand of milk, they can afford a small treat.
4. Teach About Earning as Preteens
When your child enters their preteens, it’s time to teach them about how they earn money by performing certain tasks. It’s also a great age to use their savings account to show them how interest helps their money grow over time. Paying commissions for chores instead of allowances teaches the value of work, and showing them how interest compounds prepares them for loan training later on.
Additionally, ages 12-14 mark the perfect time for playing money games like Life, Payday and Monopoly. While these are great family game night entertainment, they also begin teaching children how to make big money decisions like whether to go to college or buy a home.
5. Provide Loan Instruction to Teens
As teens prepare to head off to college or Uni, it’s time to teach them about loans. Many people look at debt as evil, but the fact is, credit provides valuable leverage young people can use to obtain an education or buy a home. The trick is learning to use credit wisely and educating about it early on.
While teens under 18 cannot qualify for credit on their own, you can apply for a low-limit credit card with them. As long as you are comfortable with the limit, this tool can help your youth start establishing a credit history, helpful when they turn 18.
6. Play the Stock Market Game Before Graduation
Finally, many young people and even adults are afraid of investing in the stock market due to fears of losing everything in a crash. However, historically, such investments stand the best chance of keeping pace with inflation. Regular savings vehicles paying less than 2 percent interest fail to do this, although their liquid nature makes them worthwhile.
You can register online to play the stock market game to get over your teen’s fear of investing and educate them how to do it succesfully. While you do not need to use any real money, playing with fake money is fun, and teaches valuable skills.
Teaching Kids the Value of Money
Since kids begin forming money opinions young, parents should instill positive habits as early as possible and reinforce these lessons throughout their child’s development. With practice, your children will reach adulthood with sound financial habits for life. I hope you’ve found this post interesting and you might want to check out my other money saving posts if you want to hear about out no-spend year!
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