As parents, one of our main goals should be to teach our children financial responsibility. The fundamental strategy to teach the kids anything is to model the behavior you want them to learn.
But when should we begin? According to studies from the University of Michigan in Ann Arbor, money behaviors are built as early as age 5. However, it's essential to introduce financial terms to children at an age when they can comprehend them. Learning to tie shoes should be similar to acquiring financial skills. Thus, do not panic and start step by step using money terms, such as "save," "share," and "choose,” as well as phrases like "Save for a rainy day," "Share with your friends," etc.
Play With Your Kids
The first step to talk about money to your kids is to invent little money games and show them the value of coins and even 1 penny. How about helping your children in creating their own money? Make coins and money out of papers and cardboard by cutting them out, choosing a currency, and coloring them. You can use this money as a simple means of distributing tasks or practicing math games. Then you'll want to make sure your kids comprehend what they've learned and can apply what they've studied. Ask questions like “Which coin has the greatest value?” or “Can you put the money from smallest to largest?” etc.
Give Children Real Money to Manage
Take your children to the store. Teach them to manage real cash. Real-life lessons are incomparable. Begin with basic activities in the store. First, allow them to make their own decisions. Then, let your children handle money and count change. Parents should show their children the opportunity cost in these small stores: “If you buy these candies, you won’t be able to afford bread.” Your children should be able to weigh options and grasp the consequences.
Allow Them to Earn
Children can have their own money in order to learn how to make wise choices. You should consider requiring your children to perform specific chores to earn their allowance. Of course, there should be some duties the kids have to do without pay as part of a family. But if they want “to earn,” they have to complete specific tasks.
Save, Spend, Give
Teach the model of saving, spending, and giving. This is the fundamental decision we all have to make with every dollar we earn. All you have to do is teach your children to divide their money into three categories: spending, saving, and giving to others. Then determine how much of each dollar they "earn" should go into each category. By the time they reach adulthood, children should have developed the practice of saving a portion of their earnings on a regular basis.
However, Avoid Overteaching
Understand the situation and act accordingly, using small examples whenever possible. You don't have to overwhelm your children with details or worry about money. Children are keen observers who are quick to pick up on new information. Thus, as a parent, look for teachable moments to talk about money with your children.
According to studies, children learn silently and tend to follow in their parents' footsteps. For example, a recent survey from asset management firm T. Rowe Price showed that when parents had terrible money habits, their children adopted bad money habits. Thus, be mindful of what you say and how you act around children, as they pick up on things when you least expect them.