It’s never too early to start teaching your kids about money. Talking finances with kids from a young age can help set them up for success later in life. But where do you start? Well, we should explain why it’s essential to talk to kids about money in the first place.
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Why It’s Important to Talk Finance With Kids?
Money is a topic that’s typically seen as taboo. We don’t like to talk about how much we make, what we can and can’t afford, etc. But if we want our kids to be financially successful, we need to break the cycle of silence around money.
Talking to kids about money can help them understand:
- The value of money
- How to save and spend wisely
- The importance of budgeting
- That there’s a difference between needs and wants
Related Articles in this blog:
- 10 Tips for Household Money Management
- Explain Money to Children, 11 Reasons Why it is Useful
- How Young is Too Young to Understand Money?
- Money Lessons for Kids? Values, Saving, Spending and Giving
- 10 Mistakes Parents Make in Teaching Kids about Money
- How Much Should Be a Kids Pocket Money per Week
- How to Teach Kids About Money at Every Age?
- 7 Ways of Teaching Money Concept to Children
- 10 Best Ways to Teach Kids About Money
- 8 Ways Daily Money Management Activities to Teach Financial Literacy to Kids
- Teach Teens About Money (including credit card and mobile app)
- Best Way to Save Money for Kids: 8 Tips Every Parent Should Know
When You Should Start Talking Finances
You can start talking to your kids about money as early as three or four. Of course, the conversations will be different depending on your child’s age.
At first, you can teach them the names of different coins and bills. As they get older, you can start talking about basic concepts like saving and spending. By the time they’re teenagers, you can have more in-depth discussions about credit and investing.
That way, by the time they’re adults, they’ll be well-versed in all things financial and will be able to make sound decisions about their own money.
10 Rules for Talking Finances With Kids
There are a lot of different ways to approach the subject, but here are 10 rules for talking finances with kids that can help you get started:
Rule #1: Spend Concisely (They’re Watching)
You may not realize it, but your kids are always watching you. They see how you spend your money, and they learn from it. So, if you want them to be good with money, you need to be too. That means spending wisely and not blowing all your cash on unnecessary things.
Rule #2: Make Sure to Give Them an Allowance
Giving your kids an allowance is a great way to teach them about money, and it shows them that they need to work for their money and that they can’t just spend it all willy-nilly.
Plus, it’s an excellent opportunity to talk to them about budgeting and saving. You can help them set aside a certain amount of their allowance for savings and spending, and the rest can go into their piggy bank.
Rule #3: Reward Them for Finishing Chores
Another way to teach your kids about money is to reward them for completing chores. For example, you can give them an extra dollar for doing their homework without being reminded or 50 cents for cleaning up their toys.
That teaches them the value of hard work, but it also shows them that they need to be wise about how they spend their money.
Rule #4: Teach Them How to Save Money Early
One of the most important things you can do is teach your kids how to save money. The sooner they start saving, the better off they’ll be in the long run.
You can open up a savings account for them and help them deposit money into it. Or, you can match whatever they save. For example, if they save $5 from their allowance, you can add $2.50.
Rule #5: Encourage Them to Do Math
Math may not be everyone’s favorite subject, but it’s an essential skill to have to manage money. So, it’s important to encourage your kids to do math from a young age.
US researchers have recently discovered that children who are not good at math at an early age are more likely to feel more anxious about earning and spending. Children who are good at calculations, on the other hand, are more likely to donate and save.
You can do this by helping them with their homework or doing simple things like counting change together. The more exposure they have to math, the better they’ll be at handling money.
Rule #6: Explain Where Money Comes From
Your kids may not know where the money comes from, so it’s important to explain it. You can tell them that you earn money by working and use that money to buy things like food, clothes, and shelter.
You can also explain that money doesn’t grow on trees, and you need to be careful with how you spend it. Show them how you budget your own money and explain why it’s essential to save.
Rule #7: Be Open About How Much You Earn
Many parents are reluctant to talk about their income, but it’s essential to be open about it with your kids. They need to know that money doesn’t come easy and that you have to work hard for it. You can tell them how much you earn and explain what your job entails.
Also, you can show them your pay stubs or tax returns so they can see where the money comes from.
Rule #8: Teach Them to Spend on Experiences
One of the people’s biggest mistakes is spending money on things instead of experiences. That’s because experiences are often more memorable and enriching than material possessions.
So, it’s important to teach your kids to spend their money on experiences rather than things. You can take them on trips, to the movies, or out to eat. Or, you can buy them tickets to a concert or a play.
Rule #9: Explain What You Can and Can’t Afford
It’s also important to explain what you can and can’t afford to your kids. Many kids think that their parents can afford anything, but that’s not the case.
You need to be honest with them about your financial situation and explain what you can and can’t afford. This will help them understand that money doesn’t grow on trees and need to be careful with how they spend it.
Rule #10: Be Honest
The most important rule is, to be honest with your kids about money. Please don’t lie to them about your financial situation or try to hide things from them.
They need to know the truth about your finances to learn from your mistakes and make better decisions with their own money.
Don’t Forget to Remind Them There’s More to Life
Money management is essential. Extremely important, and you need to teach your children how to save and spend wisely. But it’s also important to remember that there’s more to life than money.
Since 1971, researchers in the US have asked undergraduates what motivated them to enroll in college. Over time, more and more kids start citing money as their main reason, and that’s not a great motivation.
Your kids should know that things in life are more important than money—things like family, friends, health, and happiness. While money is essential, it should never be the sole focus of your or your child’s life.
Closing Thoughts
Talking about finances with your kids may not be easy, but it’s important. These 10 rules will help you have those tough conversations in a way that is both effective and age-appropriate. Teaching your kids about money will set them up for a bright financial future.
About Me
Hi, there. I am Lin. Together with my husband and two kids, we live in the beautiful Netherlands in Europe. I am dedicated to self-development, creating quality time for the whole family, and fully supporting kids with their potentials with all I have learned from engineering, MBA, and 10+ years of working experience in the energy sector.
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