Raising money smart kids

04/07/2021

 

Studies have shown that obtaining basic financial knowledge early in life can increase the chances of being financially successful as an adult. If you have kids, you should have a plan for how you intend to teach them the money skills they will need throughout life.
 
Can kids of any age learn smart financial habits?
Kids as young as four to five can start learning a few basic financial skills.  And the sooner you start the easier it is to build upon those skills. Kids are learning about money by the financial behavior you are modeling so it’s probably better if you help steer them to the correct financial habits both in what you talk to them about and in the financial behaviors that you model.
 
What is the most important concept to teach?
The most important concept is to teach them the difference between a need and a want.  And especially how important that it is to put needs first when it comes to spending. When people can clearly distinguish between a need and want, they are much more likely to make the best financial decision for their situation.
 
How can parents model financial appropriate behaviors?
Involve them in financial activities such as grocery shopping.  Even kids as young as 7 – 9 can start to understand the basic concepts this activity provides.  Show them how to make a list, take them shopping and explain how you comparison shop for each item,  show them how to use coupons and talk about how you might want that candy but it’s not on your list so you aren’t going to buy it this time.
 
What are other ways to teach good financial habits?
One great tool is the keep the change game. Give them money for something they want, for example ice cream and tell them they can keep whatever change is leftover for themselves. Some will get 1 scoop so they have more money left over and some will get 3 scoops and have nothing left over. This will tell you what money skills you might need to work on in the future with either behavior.
 
When your child is 21, what are the basic financial skills or knowledge they need to have mastered?
The 4 most important are:

  • Understand the difference between needs and wants

  • Basic budgeting skills

  • Good saving habits

  • Smart spending behaviors

If they have these skills they will be equipped to make better financial decisions all through their life and possible avoid any financial miscues.

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