Teaching kids about money can be overwhelming. If I feel lost about my finances, how can I talk to my kids about money? This is a common statement made from parents when explaining why financial literacy isn’t discussed in the home. According to a recent study conducted by Northwestern Mutual money is a dominant source of stress for 44% of American families. No wonder, parents are unsure about how to approach finances with their kids! Who wants to discuss a topic that is a dominant source of stress or that one feels ill equipped to discuss?
There is also the confusion on what to discuss: how much is too much to share, what is age appropriate or what if I teach them incorrect information. Well I have a secret for you…the biggest names in personal finance didn’t go to an Ivy League to garner their skills they went to the school of the hard knocks! Dave Ramsey, Suze Orman, The Budgetnista all became gurus from learning from their mistakes and teaching to the masses what they learned.
Now, consider your financial mishaps and what you’ve learned from them. How can these lessons be transformed into learning opportunities for the family? Don’t worry if you’re stuck on ideas, I want to share with you the secret that each child must understand and apply to win with money!
Teaching kids the importance of ownership and delayed gratification is key to for them to have a promising financial future. Teaching children about the stock market and real estate investing all goes back to ownership. Children often think that saving and investing are the same thing. Which is understandable because one is setting aside money in hopes that it becomes a larger amount. However, the difference is that a person that owns (investing) something has the opportunity to have their money make more money for them. The person that is saving money only gets exactly what was put in or taken out of the piggy bank!
Kids understand the importance of saving, but rarely apply the concept because they desire something in that moment and can’t think past that. Teaching a child to delay gratification has a lot to do with creating activities that will give the child the opportunity to consider future rewards or consequences when giving up immediate satisfaction. Reminding your child in the moment that they are about to spend all of their money and a field trip is coming up will probably not create a foundation for delaying gratification!
Below are 3 tips to teach a child delayed gratification or about ownership and about money!
1. Create savings goals
Saving for a rainy doesn’t really make sense to a child because they don’t have expenses! So how can you teach them how to save? Saving money enables one to accomplish goals. Have your children come up with a short-term and long term savings goal. A short-term savings goal time-frame for children should be 4-6 weeks. A short-term saving example would be, if your children desire a video game that costs $20 dollars and they’re earning $7 dollars a week. Every dollar earned per week is not saved. A long-term savings goal time-frame should be 7 weeks or more. If the long-term savings goal is an expensive item, consider matching the amount saved per week dollar for dollar.
2. Ownership is key
- Depositing $10 in a piggy bank today is still $10 in 90 days (unless of course money is removed during that time.) But with investing there is an opportunity to make money grow! You risk losing some or all of the money invested with more risky investing options. If you’re new to investing make this an opportunity for both you and your children to learn about the topic. Consider starting your investment portfolio by downloading the Acorns app. Acorns allows you to literally invest pennies by rounding up change from your everyday purchase and putting it in an investment. Check out this video to learn more.
- If your children are in elementary start teaching ownership basics with Monopoly!
3. Comparison Shopping
- Turn your next grocery shopping trip into a math and money saver activity with your children! When making a grocery list have your children pick a couple of items on the list to comparison shop. For example, if you have cereal on the list tell your children that they are responsible for picking 3 boxes at a total $10.00. Tell your children that this will be the cereal that they will be eating, so that they can make quality decisions. Give them pointers of looking for items on sale or online coupons. Create an incentive by letting them collect a portion of the money saved! This activity will teach the importance of planning for purchases, instead of just throwing whatever one “wants” in the cart.
Hopefully, these activities will be the start of your family beginning a new financial legacy!
Tasha Danielle, CPA, founded Financial Garden during her journey of eliminating nearly $80k of debt before the age of 30. Tasha’s grandmother taught her about finances at an early age and this influenced her to be a financially responsible millennial. After working with youth for several years, she realized their lack of financial literacy. Tasha decided to plant seeds of financial literacy at every age by formally founding Financial Garden in 2014.
Tasha has nearly a decade of corporate finance and accounting experience with Fortune 100 and 500 companies. She has also authored “Amina’s Bracelets: A Kidpreneur Story” to plant the seed of entrepreneurship in young children. The book is available on Amazon!
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