We’ve been getting a lot of great response from our recent articles about financial therapy. A couple weeks ago, we talked about ways you can improve your own personal relationship with money. This week, we want to focus on how you can help your children develop a better relationship with money.
We also covered the topic of money scripts recently. These are often subconscious views of money that most of us develop at an early age. They might come from things your parents actually took the time to teach you, or they may have been subconsciously built through observation and personal experience. An understanding of how money scripts work can be a good first step in knowing how to effectively teach your own kids about financial issues.
The truth is you want to start teaching your children about money at an early age. Research shows that by age 2 or 3, a child can begin understanding certain basic financial concepts. Here are a few ideas you can try, broken down by age ranges where these exercises will have the most impact:
Explain to them that things cost money. When they want a toy or a treat, they need to understand that money isn’t magic and there is a limited supply. The lessons can be found in prioritizing purchases and understanding that sometimes you have to wait to get what you want. A little delayed gratification never hurt anyone. In fact, it’s a great way to learn the value of a dollar.
Beth Kobliner is a bestselling author who helped create the Money as You Grow program. One of her suggestions is to set up three jars for each child at a young age. Every time they earn money through chores, an allowance or as birthday gifts, have them split it equally amongst the three jars:
“Spending” – This is okay for small purchases like candy, games or cheap toys. They will quickly see how long their spending money lasts, and it should ultimately help them be more thoughtful before giving up all their cash.
“Saving” – This money is to be put away. They may be saving up for a bigger purchase like a toy they really want, or it’s just money to set aside and see how much they can save over time.
“Sharing” – This money is for them to share with others and create a more charitable outlook when they are young and impressionable. They might see that others need the money more than them, and a willingness to share is always a good thing.
This is where you ramp up your financial lessons because they will be able to further grasp where money comes from and where it goes. Start involving them in minor financial decisions and show them why you spend your money in certain ways.
Let them help you with clipping coupons and looking at ads before you go to the store, so they can see how much different things cost. Tell them why you might be buying a generic item rather than name brand. They’ll see that not everything costs the same and sometimes you have to make smart spending decisions.
Give them a small amount of money and a task of choosing something specific to buy in the supermarket. Let them pick out what they think is the best value with the limited budget they have in hand.
Next week, we will cover ages 11-18 in part 2 of this article. Stay tuned!
For all of your family’s financial planning needs, Illumination Wealth is here to help you reach your financial goals with personalized service and objective advice. Contact us today!