Originally published on VictorJung.org
Personal finance is one of the most important topics that children should learn about at a relatively young age. Giving children some teachings and practicals on the topic ensures that they grow with the right foundational knowledge. It also advances their strength in personal finance planning as they grow up.
According to the president of JumpStart Coalition, a children’s finance literacy group, parents should lead the way by starting conversations and incorporating finance lessons in everyday activities at home. Using a systematic approach when performing these lessons ensures that children can progressively grow their competency on the subject. Here are a few ideas on how to go about teaching your children the importance of personal finance.
Start with the importance of money
From the beginning, children should be taught how to identify and value money accordingly. Giving them a fundamental understanding and demonstration of financial value ensures that they can appreciate its importance whenever they see it. This can be done by showing them what exactly money can do for them and how it should be handled.
Spending vs. saving
Children also need to have sufficient knowledge on how to acquire money, how to save it, and how to spend it wisely. This can be perfectly demonstrated by asking your child to do a mild task and then ‘paying’ them a small salary. The essence of an allowance is to ensure that children understand that to get money, they have to do some work. It also reinforces the idea that money should be appreciated. Once they acquire money, you should then proceed to show them how to set a personal budget of prospected expenses, including setting aside some savings.
Setting a good example
There is perhaps no better way to teach children effectively than by serving as a good example. Using your life as a case study on how to handle money, how to budget, and how to save gives your children a reinforcement of ideas that are highly unlikely to be forgotten. Taking them on a trip to the grocery store, for example, demonstrates that they can set a clear budget to purchase only the necessary goods. From the change you get back after your trip, you can then teach them the value of setting aside some money for future use by tossing coins in a private piggy bank.