Teaching our children good attitudes toward money from an early age is imperative if you want them to avoid the debt traps so many people fall victim to. This education can start a lot younger than you may think. It comes down to good organization with money, a good attitude to money and good role models –that’s you! Here are the twenty top tips for you to try:
1. Play ‘Shops’: When your children are very young it is great to play shops with them to teach them about the concept of money. You can start with pretend money and then gradually move on to real coins and notes with your children. This allows children to experience paying for something and receiving change. It does not need to be precise but using figures close to realistic prices is extremely beneficial.
2. Good old Monopoly: My husband swears by this one, saying that is how he learned the basics of real estate - buying property; collecting rent etc. We often play it with our kids who picked up on the concepts more quickly than I even expected.
3. Practice, Practice and more Practice: Give your kids money to spend occasionally at the news agency, for example. To begin with, give them the right amount of money, then graduate to giving more than required so they receive change, prompting a chat about how purchases work.
4. Money Jar: Save all your small coins in a communal jar to buy a joint family purchase so that everyone feels a part of the saving process and the anticipation that comes with waiting for something you really want.
5. Joint Decisions: When shopping, get your child to help to pick out the items needed at the best prices. Talk about your budget and what you need to do to stay on target, jointly making a decision between this treat or that one, for example. They will be way less likely to throw a tantrum if they understand the reason behind what you do and don’t buy.
6. Plan Ahead: When saving for something tell your children what it is and how much money you need to save and how long it could take; this is a great way for children to see that we need to wait and save to get what we want. Instant gratification doesn’t rule the world! Be sure to tell them occasionally that although you would like a certain item, you are unable to get it due to the cost, so that when you say no to them (as you should a reasonable amount of the time) then they know you don’t get everything you want either.
7. Sacrifice: Explain that you sometimes need to cut back on things to be able to save enough money to buy something you want or need. This doesn’t happen overnight and will help teach them patience.
8. Chores/Pocket money/Allowance: As soon as they are old enough ( many say 4 is a good starting point), encourage them to earn pocket money by doing chores at home. Negotiate the price for different tasks, making sure they understand why a certain chore is less than another, more time-consuming one. Encourage your kids to do odd jobs for others to gradually earn their own money and learn to be accountable for it.
9. Savings: Introduce the idea of saving early on. Show them a bank statement and explain the fees, the interest & all the ins and outs. Show them the value of regular savings & how they can add up over time. Open up a bank account for them when they are a baby and put small amounts in here and there until they have their own to put in from birthday presents etc.
10. Donations: Be sure to pass on the concept of “giving” as this shows that donating to charities and the like is a normal and worthy thing to do. Get them to choose a favorite charity to give some money to, to feel ownership of the activity and feel proud that they are contributing and helping make a difference.
11. Out of ‘love’ chores: Explain to the kids that as they get older they will be expected to do some of these jobs simply as part of being in a properly functioning family. It’s all about team work to make life run smoothly for everyone.
12. Spending choices: Let your children spend their savings on what they choose to. It’s one of the few areas they will feel they have control over, and to take it away from them could cause avoidable conflict.
13. Cash Flow Concept: When you are cash poor, be sure to keep the kids informed about the family budget situation. If you need to reduce their pocket money temporarily, then do so after discussing the steps needed to take to pay the bills and put food on the table, ensuring they appreciate that you too are tightening the belt on expenses as well.
14. Language of Money: Use the following terms as part of your day-to-day life and explain in more detail as time goes by: dollars and cents, spending, earning, saving, budget, cost, value, coins, bank, cheque, credit card, debit card, debt, owe, interest, loan, mortgage, change etc.
15. Set up System: Have 3 money containers - one for Expenses, one for Saving and one for Donations. All three are important to learn about as part of their ongoing education about managing their finances and having a social conscious as well. The amounts can vary and are interchangeable depending on their age and interests – some hobbies are extremely expensive!
16. Write a list for Expenses to see what it totals and what can or can’t be forgone. Kids love a bargain as much as we do, so encourage ‘bargain hunting’ to get the best deal. Take note of the savings and perhaps get them to consider (not force!) putting that in the savings container rather than keeping it in the spending one!
17. Buy a Special Note Pad: As your children get a little older get them to keep track of their money by using a notepad (as you should too) to record all your incomings and outgoings along with a running total – great habit to get into as an adult.
18. Bank Account: Choose a children’s account with the best interest rate and preferably no charges. Make sure you let them open the mail when their Bank Statement comes and for them to file it in a special spot in the filing cabinet for example.
19. Teach your kids how to be Assertive Shoppers: when it comes to the price you pay for things (i.e. is that the best price you can do?) and also if there are any problems with any purchases you make. Faulty goods are not acceptable and although some shop owners try to put the onus back on to you, it is their responsibility to sort it out. Educate them to be aware of how to approach the retailer if there is a problem with a purchase. Support them so that they can claim a refund successfully without entering into an argument or feeling negative about the experience.
20. Keeping Important Receipts: is essential for proof of purchase so get your kids into the habit of keeping these all in the one spot in their own folder or maybe in a file along with their bank statements.
Claire McFee is author of Organize Your Life and co-Creator of the new Organize Your Life e-Organizers. Claire has a ~10years experience helping people get more out of life by being more organized and improving their mindset. Claire is also a speaker and has been extensively showcased on TV and other mediums.