Teaching Your Children About Money: Building financial literacy from younger years

Building Financial Literacy (Representative image)

One of the best life lessons you can teach your child is about money. It sets a basis for responsible money-handling and lets them develop healthy habits that they will carry on throughout their lives. You can provide some of the basic concepts while they are young, so your children may grow into making smart decisions.

Here's how to make financial learning a part of everyday life:

Laying the Foundation: Teaching Money Basics Early

Children are naturally curious, so instil from the very beginning basic ideas of saving, spending, and value for money. Explain with the help of examples how money buys things but has to be earned by working. Any time your child wants a certain toy or a treat, seize that opportunity to explain how you budget these things.

Activity Idea: Give your child a piggy bank and initiate a discussion on how to save up for something special. In this way, visualized saving will help them understand that money grows over time.

Give an Allowance and Teach Budgeting

A modest allowance to children is probably the best approach in teaching money management. An allowance could be given to them upon completion of chores or on a weekly basis. Through this allowance, encourage your child to allocate amounts for spending, saving, and giving.

Hint: When your child wants to buy something expensive, it's the right time to teach them about delayed gratification by encouraging them to save the money over time.

Teach the Value of Work and Earning

Teach your child that money is earned because of working. To help them understand this even more, provide your child with the opportunity to earn additional money for added chores or tasks. This helps instil in them an understanding of hard work and personal responsibility.

Activity Idea: Create a chore chart showing different tasks and "wages" for translating hard work into increased earnings.

Describe Needs Versus Wants

Probably the hardest lesson for kids to understand: not all needs may be wants, and vice versa. Let your child understand how to strike a balance when spending money.

Activity Idea: Create a list with your child of things and ask him to categorize each into a need and a want. This will give them an overview of how to prioritize expenses.

Teach About Giving and Charity

Encourage your child to set aside part of their allowance or money in a giving fund. These activities-whether donating to a cause nearby, or buying supplies for a school drive-will help kids build empathy and an awareness of the impact of giving.

Tip: Let your child see the amount that you give to charities and involve them in decisions about where the money is going.

Lead by Example: Be a Money Role Model

Children tend to mimic parents' habits; therefore, it is crucial to set good examples as far as finances are concerned. You can explain to them how you create a budget, pay bills, and save cash to make a big purchase. Allow your child to see how you go about making decisions concerning money and include them in those discussions appropriate for their age.

Teaching children how to manage money from an early age imparts the much-needed knowledge and skills that will guide them successfully through their financial lives. As your children mature, they will better know how to make sound financial decisions, plan for the future, and confidently achieve goals.