There are seemingly a million topics we need to teach our children, for them to become fully functioning humans in the world. How to approach money and finances is a big one. Yes, we teach by example, when it comes to money. But intentional conversations about the topic are really important, too.
Today, I’m delighted to have Denise Ochigbo as a guest on the Mindful Return blog. She is a financial coach and speaker who is going to help us identify what money-related topics we should be teaching our kiddos. I’m particularly excited about this, as my own kids just had their first paid cat-sitting gig over the holidays!
Here are her top 5 financial lessons to teach our children. Which one will you dig into with your little ones this week? Leave us a comment below!
Saving money is essential in life, but the topic can be complicated. Managing money and teaching kids how to be good stewards of money can a challenging topic for parents to teach children. It’s essential that children learn the proper steps to make the right money decisions over the course of their lives. Parents may feel and assume that the kids will understand the importance of managing finances, but it’s crucial to help kids form the saving habit early on.
Whenever it concerns money, teaching kids regarding delayed gratification can teach them to prevent useless spending and develop a value for taking hold of their finances. In light of this, here are 5 essential lessons you should teach your kids about finances to encourage them to start saving from an early age.
Lesson #1: The Difference Between Wants and Needs
Teaching children the importance of saving starts with assisting them in making the distinction between wants and requirements. Explain that necessities like food, shelter, clothes that aren’t too fancy, medical treatment, and education fall under this category. Wants are all the extras. Such as movie tickets, candy, the newest smartphone, fancy sneakers, and bicycles.
You can even quiz your kids on things you have in your house to emphasize the point further. For instance, point out goods in their kitchen or bedroom, and ask them if they are needs or wants. This enables you to discuss the notion that prioritizing your spending will help you save money for future needs.
Lesson #2: How to Make Saving Goals
Being told to save without being given a reason may seem meaningless to a child. Defining a financial goal with kids can help them become more motivated. Help them divide their goals into manageable chunks, if they know what they want to save for. Assist them in calculating how long it will take to attain a goal, depending on their savings rate.
For example, if they want to buy a $50 video game and receive $10 each week, help them figure out how long they will need to save to buy the game.
Lesson #3: How to Earn Their Own Money
Based on a 2019 survey, two-thirds of households admitted to giving their kids an allotment. According to this survey, children make an average of $30 a week for five hours of chores. Allowing your kids to earn and save money gives them a chance to learn how to use it. They learn the worth of their labor, when you give them allowances in exchange for chores.
Lesson #4: An Appropriate Place for Saving
Your kids will require a location to save their money, once they have a collecting goal in mind. If they’re a bit older, consider opening their personal savings account at a bank or buying them a kid-friendly debit card. For younger children, a piggy bank might work better. Credit cards from companies also let users set their savings objectives and receive notifications when making purchases.
Lesson #5: How to Track Spending
Realizing where the money is going is a necessary component of effective saving. With a bank or credit card app, tracking expenses is a little simpler. But you may also want to teach your children to do it the traditional way.
Having your kids record their purchases daily and sum them up at the end of the week if they get an allowance can be enlightening. Encourage them to consider their spending habits and the speed at which they could achieve their savings goal, if they made changes.
Denise Ochigbo is a financial coach, speaker, working mom, and innovative finance and marketing leader. She founded The Career Mompreneur (TCM) also known as TCM Financial Coaching with a mission to teach others how to achieve financial literacy through budgeting, understanding how to build net worth, wealth, investing, and setting financial goals. She lives in Indianapolis, IN, and you can learn more about her financial education programs here.
Want more practical tips on working parenthood? Check out my book, Back to Work After Baby: How to Plan and Navigate a Mindful Return from Maternity Leave