Conversations with your children about finance are better off happening sooner rather than later. In this day and age, a solid financial education is one of the best ways you can prepare your child for life outside the nest, but learning about money shouldn’t be confined to teenagers – start early and you can give your child the gift of money sense from a young age.
Start the conversation
Getting your kids comfortable with money means involving them in the family finances early. Some people see this as uncomfortable, but all that’s needed is to make sure that the talk is age appropriate, framed in simple terms that they can understand.
A great way to start is by talking about cost and value – simply introduce the idea of paying for things, and that items have different prices. Show your children that the practical application of maths is everywhere around us. Ask them to compare prices between similar items when they go with you to the grocery store – which item do they think is the better choice, and why?
The key aim here is to demonstrate that money is simply a tool that we use every day. Start off with simple transactions and you have an opening to broaden the conversation to other areas of money.
Need to purchase a big ticket item for the family, like a new household appliance, or even a car? Show your child that the purchase involves borrowing and budgeting responsibly.
Be reasonable though, there’s no need to over complicate things by involving them in the ins and out of your used car loan rates, but you get what I’m saying.
Talk about savings
Teaching children to save a part of their income is a hugely valuable lesson, so if they get a regular allowance, make sure to talk about why they should save a part of it rather than spend it all.
Most kids will have their eye on an expensive toy, so you can help by assisting them in figuring out a plan to afford it. It’s best to choose something that is significant, but within reach in a few weeks, otherwise, they may lose patience.
Let the reward be something that is achievable – you don’t want to make saving too much hard work at this early stage.
Show the consequences
However, it is essential to let the choice – and the consequences – be truly theirs.
You could consider doubling any amount that they choose to save – they will quickly see the coins in the piggy bank adding up. This is actually teaching about compound interest, a concept that many adults struggle to understand!
But the key is making it easy to understand at any age and relevant to real examples in their life. It’s a mistake to make money abstract at this age – children need to quickly see and feel how their money is working for them.
But one of the best things to do is simply to practice good financial behavior yourself and let your children see that. They learn most by observing what the role models around them every day do – and if that isn’t a good reason to clean up your own act when it comes to money, I don’t know what is!