Tips For Teaching Your Child About Finances

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When it comes to money matters, research shows that children tend to copy their parents. Such a statement is bound to cause a faint pang of anxiety for those of use who perhaps feel a little…inept in that area. However, if we can teach our children beautifully about manners and safety and relationships and more, we can most certainly teach them about money.

Start Young

Research has shown that adult money habits are more or less set by the age of 7, and so it is important to start educating your child early with regards to money, in order to start reinforcing healthy habits from the get-go. Of course, these kind of lessons need to age-appropriate; a child is not likely to gather much from a lecture on the importance of not getting into debt, aged 5. Make money the subject of family discussions, and as soon as your child can count, try to teach the importance of saving vs. spending. Such lessons can be timed around birthdays and Christmas, times in which your child may receive gifts of money from relatives and friends.

The Difference Between Want and Need

Children want everything. Fact. Yet it is important you instill in them early the crucial difference between wants and needs. Of course they want they new games console/bicycle/dinosaur robot. But they need to know these are very special treats or gifts, things which cost a lot of money and therefore cannot be received in a constant stream. Learn to say no to your child’s every request, so that they can understand the value of delayed gratification. A child who receives everything on demand is less likely to develop healthy habits of saving for a particular expense or ‘treat’ later on in life.

Allow Them To Try

Allowing your children to have real-world experiences of money early on is essential in developing healthy lasting money habits for later on in life. Rather than rewarding your child’s good behavior with a toy they want, reward them gradually by giving them a little bit of money each week which they can put iaside in order to buy it themselves at the end. In this way, your child can experience the euphoria of purchasing something they really want, allowing them to feel the gratification of hard work paying off. In addition, this will also awaken them to the reality of going from having money to having none again, thus reinforcing the idea that they must continue saving.

Lead By Example

Children copy their parents, outwardly and in more subtle and complicated ways. Money tends to be an area where children replicate their parent’s behavior so lead them by example! Try to limit the amount of time you spend shopping ‘for fun’ as it can create the idea that shopping is a source of…well, fun, but also an more dangerously that money is an unlimited resource.

Be honest with your children about money too – the open in your communications about family finances with your children, the more likely they are to adopt an open, honest approach to talking about and dealing with their own when they are older.

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