The current pandemic environment has thrown many parents into a tailspin as they have been forced into the home school environment due to the school closures. Teaching math, language arts, science and art, among other topics, is more than most parents can handle. So to suggest adding another subject to the list of required subjects is not what they want to hear. But now is the best time to start teaching your kids about the importance of understanding and making wise money related decisions.
Start With A Piggy Bank
Kids as young as five can understand basic money concepts and starting with something as basic as a piggy bank is a great way to teach financial decision making to the smallest members of the family. Giving kids the opportunity to decide how they will spend their money is the first lesson in helping them understand the concept of saving vs. spending. You can also tie in a lesson on delaying gratification to reinforce the importance of saving for what they want.
Save Some, Spend Some
For older children, teens, and young adults, money lessons at home also help to reinforce what “saving some” and “spending some” looks like. This is especially important as many families are facing financial shortages or job loss due to the financial climate resulting from the current pandemic. The more kids know about wise money management, the better they are able to deal with any stress that might occur when the family’s financial situation suddenly changes.
Healthy Money Habits
The biggest issue for young people who mishandle money is that they aren’t accustomed to the idea of saving, investing and spending. This is especially true if the families customs, traditions and habits don’t promote making good decisions about money. But, if they start learning at a young age they will gain the healthy money habits that support financial security in their future earning years. This education includes understanding the importance of setting goals, having a plan for how they will spend their money, and practicing delayed gratification (aka waiting to buy something they want until they have saved enough money).
My Goal is Better Than Your Goal
The importance of setting goals is one of the most essential components of teaching financial literacy and decision making to kids. Having a savings goal not only motivates, rewards and builds confidence in kids, but setting goals also help to build a solid foundation for future money management. Setting a goal and then planning how they will earn, save, invest, and then spend money reinforces the fact that money is tool we use to achieve our goals – whatever that goal might be. Goal setting and planning also help to teach kids about what happens when they don’t stick to the plan – it might take even longer to get to the “big buy”. It’s also important to help kids understand that saving for a big buy or a smaller one still requires planning.
Do As I Do…Setting The Example
Teaching kids about saving, goal setting and planning are all key to helping them make good decisions about money. But the best way parents can to teach good financial decision making is to set the example in the way they, themselves, handle money. Saving a percentage of what is earned, reducing and eliminating debt and investing for the future (retirement) are all excellent examples of how to live a financially responsible life. Sharing with your child the process of setting goals, spending only what is planned (budgeting) and taking care of “needs” first and then “wants” is the best way to help them avoid money mistakes in the future.
