Teaching Kids About Money

As a parent, have you ever wondered why your kids always ask for money? They do it because they understand the power of the dollar! 

Have you ever witnessed a toddler's excitement when given a shiny quarter? Even toddlers know that money is something to be valued. That is why you can go a bit further as a parent and be intentional about what your kids understand about money management. 

It's necessary to teach kids about money management because it will help them grow into responsible adults who are less likely to get into financial trouble. When you teach your kids from a young age about budgeting to live within their means, they will master these skills for life.  

Here are some of the top tips for instilling healthy money habits at early stages of your child's life.

Understanding the Three S's: Save, Spend, Share

There are three S's when it comes to money known as spending, saving and sharing their money.  

These are the following things you can tell your kids about the three S's: 

SPEND

You can teach your kids all about spending money. You can also show them the difference between buying things they need and want. You can also make it part of their education to identify different things that fall into the need or want category.  

SAVE

You can teach your kids how to save by giving them a piggy bank. Whenever they have their allowance or spending money that you give them, you can encourage them to keep some in their piggy bank. Saving cash is an essential skill your kids can learn to help them manage their finances later in life. 

SHARE

Sharing money is an essential part of the money lifecycle. Teaching your kids to give money to charity and for causes that are near and dear to their hearts should be something they do from when they are young. 

Teach Kids the Value of Saving Money

Saving money should be something you teach your kids when they are little. As mentioned earlier in the article, giving your kid a piggy bank will help them to learn the basics of saving money. They need to practice saving money to help them master the habit as an adult. 

There are many ways you can do this, for example:  

  • Talk to your kids about the importance of saving money. 
  • Explain the benefits of saving money for a rainy day. 
  • Count the money your kids have saved in their piggy bank with them. 
  • Give them a reward when they reach a milestone in their saving journey. 

Setting Goals: Encouraging Saving for Short-Term and Long-Term Objectives

When your kids are little, you must teach them about saving money for long or short-term goals. Encouraging your kids to save for the things they need a few months down the line – or even years down the line will help them develop a knack for patience and perseverance with finances.  

Examples of short-term goals your kids might want to save towards: 

  • The latest sneakers
  • A brand new game console
  • Back-to-school clothes
  • School books
  • An upcoming Birthday party 

Examples of long-term goals you might want to save for your kids

  • Saving for college 
  • Saving for a brand-new car 
  • Saving for a house  
  • Saving for retirement 

The Power of Compound Interest: Making Saving Fun and Rewarding

As part of saving money for your kids, you can also set up investment accounts for minors – and get your kids involved in the process. You can manage their account and watch as the money grows. With the power of compound interest, the money you invest will grow over time, and the interest will grow. 

Saving is fun and rewarding; you can make your kids understand this. In addition to setting up an investment account, you can make saving money a practical exercise.  

For example, with the savings jar, you can have specific saving goals your kids want to save towards. Label each jar and count the money together every week. When you give your kids their allowance, remind them how much money they need to save to reach their goals. 

Smart Spending Habits: Teaching Kids to Make Wise Purchase Decisions

When you start teaching your kids about money, the top of the agenda should help them make smart decisions. 

For example, you can ask your kids questions about the purchases they want to make, such as: 

  • Do you need this? 
  • Will this purchase add any value to your life? 
  • Can you go a few weeks without buying it? 

This takes us to the next point. 

Differentiating Needs vs Wants: Developing Responsible Spending Skills

When you start teaching your kids about money, they must also identify the difference between their wants and needs. You can also make this a fun exercise for them when you go grocery shopping together.  

For example, you can ask your kids the following questions when they want to buy something new: 

  • Is this something you need? 
  • Can you live without it?  
  • Is this a want or a need? 

Finally, the best way to teach your children the difference between wants and needs is to get them to label items that are wants and needs. For example, when you take them grocery shopping, and they pick up something that's not on the shopping list, they can identify that it is a want and need to budget for it as part of their savings.  

Budgeting Basics for Kids: Allocating Money for Different Purposes

The three-jar system is a popular way to teach children to budget their money and allocate it for different purposes. For example, one of the three jars can be for 'saving for a rainy day', the second jar could be for 'saving for something fun', and the final one for 'money for the future'. For each of these jars, you can teach your child to save for different things simultaneously. 

In closing, teaching your kids all about money management is essential. You can do many fun practical activities with your kids and teach them how to make smart money decisions now and in the future. 

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