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6 Financial lessons to teach your children

Posted: 11 Apr 2018

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As much as we wish, money doesn’t grow on trees. Some of us learn that the hard way. As children, understanding where money comes from isn’t as clear as it is to adults. Parents have a responsibility to teach their children about how money works in the real world. Here are 6 financial lessons you can teach them to expand their understanding about money. 1. The experience of real money For very young children, playing “shop” is a great way to expose them to money, and teach them some arithmetic at the same time. Set up a make-believe shop, where children can roleplay with adults as both the customer and/or the shopkeeper. Use real coins to introduce them to actual money. 2. Where money comes from Mom and Dad’s wallets or the ATM may seem like magical places that just generate money. Use dolls and money to explain in simple terms how you earn money from working, where that money goes, and that it is limited. Teach them how an ATM works; or if they are old enough, get them a children’s bank account. 3. Saving and creating a budget Draw up a basic budget on the child’s terms. Divide their allowance into: • Savings (20%): money that is built up until they have enough to pay for an expensive toy. • Spending (70%): money they can use whenever they want to buy sweets, etc. • Sharing (10%): money they can give to charity or to use to buy a gift for someone, e.g. a chocolate or flowers for Mother’s Day. Note: It’s important to set hard boundaries in case their money runs out. You will not be teaching them anything if you keep funding them when they run out of money. 4. Thinking about credit Teaching children from an early age to be responsible about their own money, and someone else’s money, is important. An easy way to teach them about credit, is if they want an expensive toy, but haven’t saved up enough, buy it for them and extend them credit. It is important to discuss this with them and set up the payment rules about when and how much they need to pay back with interest. For younger children, incorporate credit into the shop game. Note: You need to be as strict with the terms of the loan. If the terms aren’t met, take appropriate action: warning letters or even (temporary) repossession. 5. Talking about family finances Children like to be included and when they are, they will understand things more. Include your children when discussing family finances. Show them how your shopping budget works. Take them on a shopping trip and share your tips and tricks you use to save money. 6. Embrace technology Children of all ages love technology. Learning by swiping and clicking is an engaging way to teach them about money. There are many apps available for children to learn about finances, from saving to credit. Also, some banks even have apps that are connected to children’s accounts that teach them about managing their money. Bonus tip: For teens, make them responsible for buying their own toiletries as part of their own personal monthly shopping.

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