Is it Too Soon to Talk About Money?
In case you’re wondering, no. It is never too early to teach children about money. Having early conversations about it helps them understand its value: “Money doesn’t grow on trees” and introduces them to savings: “You can’t spend it all in one day.” “You need to save for a rainy day.”
It can help them acquire knowledge, develop financial skills, and build healthy relationships to become financially independent adults. And no, you don’t need picture-perfect finances to teach them. On the contrary, it can help you stay accountable for your goals.
Here are a few tips that can help you teach your child about money:
Tip 1: Start with the basics: Money vocabulary.
As with their fluency homework, pick a word per week to learn and practice. Money is something we earn and exchange for something we want or need.
Tip 2: Teach them about budgeting and the value of money.
Help your child understand the concept of budgeting by giving them a small allowance, paying them for doing chores, or hiring them as assistants. Have them allocate it to different categories like a save, spend, share plan.
There’s no right or wrong way of going about how you give some money to your kids to help them practice their money skills. You can dive deeper into the subject with Saving Buckets and Spending Buckets as they age.
Tip 3: Teach them about savings and delayed gratification.
Help them set financial goals with a savings challenge and teach them about opportunity cost. They could get something better if they save for a few weeks instead of spending it every week.
It might even be a good time to teach them about compound interest and how a high-yield savings account could help them reach their goals sooner.
Tip 4: Talk about money often.
Making money a regular topic of conversation in your home can help kids feel more comfortable with it and help them feel more confident in managing their finances.
Talking about everyday purchases can help them understand “wants and needs.” Having them help you with the grocery list will teach them to have a plan and not see shopping as an impulse.
Tip 5: Use real-life examples.
Explain that bills are financial commitments to pay for a good or service. They have due dates and must be paid on time.
It could be a good opportunity to discuss debt and credit. Talk about interest and how paying interest on a credit card doesn’t work in their favor. However, not all credit is bad, and it is possible to use credit wisely.
Tip 6: Be a good role model.
Children learn best by imitating adults, so regardless of how you learned to interact with money, try your best to teach them healthy relationships and help them develop healthy habits.
Remember, teaching children about money is an ongoing process. Keep the conversation going, and be patient as your child learns and grows. By teaching your child about money, you are setting them up for a lifetime of financial success.
Additional Resources: Saving for Your Child’s Future
