April is Financial Literacy Month and a great time to start educating our children about managing money. Developing and establishing healthy financial habits early in life are big steps toward helping children achieve a sound financial future. While there is a lot of help online, parents have more capacity than they realize for teaching their kids about money. Lessons are learned by setting a good example and explaining basic principles as the opportunities arise. We know you want to see your children succeed, so here are some lessons we thought might be helpful.
- Children may understand “needs versus wants”. Pointing out age-appropriate examples they can relate to can have a great impact. For example, food versus toys, for younger children and clothes versus designer jeans for teenagers. This will help them make distinctions on their own as to what is necessary and what is nice. And, it helps if they witness you making these kinds of decisions.
- Children need to understand the limitations of money by seeing that dollars spent are no longer available for anything else. Consider ways to involve your children in everyday choices so they witness the connection between choices and the limits of those choices.
- Let children experience money mistakes on their own. If they squander birthday money on one purchase, they will come to recognize “impulse buying” first hand. It is important that you do not step in at this point to replace any of this “ill-spent” money, or the lesson will be lost. Experts suggest that it is also important that parents share their mistakes so the children will see that it’s a life-long process. This can be a powerful way to lead by example.
- Demonstrate to your children, by your spending habits, that it’s always better to think through purchases. Does this purchase have to be now, can it wait until later, can it be done without? Most money habits are picked up from watching you. They will more than likely learn values and behavior more quickly from actual experiences.
- Teach your children to save and rejoice with them in watching their small savings grow! Show them the tremendous growth potential of money saved consistently over time.
- Explain what a budget is and how money is used for life and living. Share the family budget and how it works. Open a checking account for your child and instruct them in its use and the balancing process – there’s a great lesson.
Be open and honest about how money comes in and goes out the door! This is an education of a lifetime, literally. It isn’t just a single conversation or teaching session. It’s a continual process of questions, answers, behaviors and comments throughout the formative years. You are teaching all the time, whether you realize it or not. Those “sponges” are watching, learning and absorbing!
Have a great weekend!