Ways to teach kids smart money habits

As parents, we want what's best for our children, but above all, we want our children to be safe, secure, and financially independent as they grow into adulthood.

One of the best gifts we can give our children is financial literacy. Money plays a factor in every step of our lives, from where we live, to what we eat, the car we drive, and the vacations we take.

According to a study, parenting styles in the early years could influence a child’s cognitive abilities. Financial education from parents during childhood is linked with healthy financial behaviors in emerging adulthood. Children as young as seven develop basic money habits through observation, instruction, and practice.¹

How to teach your child good money habits

Talk about money

Parents can sometimes be reluctant to talk to their children about financial matters. It could be because money is just a complex subject to discuss with children. But it's never too early to discuss saving, debt, and investments.

Talk about saving

It is a good idea to start talking and discussing money-related matters from the moment they learn to count, including the value of money and what to do with it. Your child's early interactions with money would generally involve spending it on things they or the family needs. So it's essential to make them understand that saving money is as important as spending money. 

If your children receive an allowance, you can kickstart this habit by encouraging them to save a portion of their allowances in a piggybank. You can even teach young kids short-term goals, like saving money to buy a toy they want. Short-term goals can teach children about delayed gratification, which help teach them about long-term goals as they grow up.

As your child grows, you can encourage them to save a small portion of money from their allowances or earnings into a real bank account which can help them for future needs.

Create opportunities to make money 

Until your child is old enough to earn money through jobs like babysitting or walking dogs, you can create opportunities for them to earn money at home.

Your child can do specific chores or jobs around the house to earn an allowance, but make sure to keep basic chores 'pay-free'. 

Introduce budgeting

Learning about living on a budget, not necessarily buying everything they desire, is vital to money management. 

If your child wants something that may not be feasible to purchase and is stubborn about it, you may have to explain to them why that purchase isn't the best idea right now. If they are persistent, you may ask your child to pitch in from their savings and make space for it the following month.    

Model sound financial behavior

Children learn from observing the people around them. So if you want your children to learn smart spending and saving habits, they need to see you doing the same. 

Teaching your child about good money habits will take time, but practicing what you preach is equally essential. Good money habits can include shopping on a budget, reusing things instead of buying brand-new items, or even using coupons and discounts to save money.

At byjuslearning.com, we provide curriculum-aligned, grade-level learning experiences for kids between ages 4 to 8, helping them build on skills they learn in school. 

Disclaimer: The material provided in this blog should be used for general informational purposes only and should not be relied upon for financial advice.

References:

1. Whitebread, Dr. David, and Dr. Sue Bingham. Habit Formation and Learning in Young Children. University of Cambridge. 2013, from https://mascdn.azureedge.net/ cms/the-money- advice-service-habit-formation- and-learning-in-young- children-may2013.pdf