How To Teach Your Kids About Money

How To Teach Your Kids About Money

What You Need To Know

  • Kids can learn about money as early as they can do chores.
  • You can teach children about money within your budget.
  • Connecting tasks to pay can help your child understand how work generates income.

Many guardians would like to teach their children about money. Sustaining generational wealth requires the next generation to be financially skilled. You can start with simple lessons and introduce additional principles as the child grows.

Focus on general foundational principles. The earlier you start the lessons, the more likely it will become a part of who they are. Here are some financial principles you can teach your children.

 

  • Work May Generate Income

You can do this by linking tasks to income. Be careful not to encourage entitlement by giving commissions or allowances for regular chores that, for example, are to teach responsibility. Have a chore/errand chart so that you and the child are on the same page.

The chores/errands should take little time. The tasks should be independent of their regular day-to-day routines. Younger ones can take ten to twenty minutes maximum to do their daily tasks.

The tasks by older children can take up to thirty minutes daily. Payment can be weekly as the concept of time for children feels longer than for adults. Align amounts to your capacity to pay.

 

  • Budgeting

Teach them how to split their money for various causes. You can start with the categories of giving, saving, and spending. Work with general percentages per section.

For example, some Christians may encourage giving ten percent of their income. You may link them to charities. The idea is normalizing sharing with others.

The overall purpose of teaching your children budgeting is to normalize having them take control of their finances when they grow older. Make the process simple to encourage their involvement. Use transparent piggy banks, which motivates them as they see the money increase over time.

 

  • Earning Income Passively

The lesson is best for children in their teens with a background of the other two lessons. The focus is the power of investment. You can teach them, for example, how money can earn interest.

At this point, they probably have a better understanding of how math works, which is foundational for how compounding works. They also appreciate the concept of time much better. You can allow them to suggest ways to earn income passively.

Be open to their ideas, as there are always new ways to earn income passively. Listening to their suggestions can be an opportunity to teach them how to differentiate between genuine concepts and scams. You can open for them an interest-earning account for a practical experience.

 

Related Article - How To Build Wealth Using The Rule of 72

 

Additional Tips

The focus is to teach beneficial financial principles instead of having children accumulate cash. Children learn more from seeing than hearing. Only teach principles that you align with.

Living differently from what you teach can cause mistrust. Explain why something makes sense to encourage understanding of your thought process. This mindset will encourage getting to the root of issues when facing challenges.

Be open to questions from your children. There is nothing wrong with being honest with your challenges. Teaching your kids about money may change how they handle finances in the future.

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