From birth, children are constantly learning new skills, being taught new lessons. One of the life lessons often overlooked in this process, however, is money skills.
Although many colleges and middle to high schools have started to include financial education in their curricula, teaching children about money remains largely a role for the parents. Some parents are concerned of their ability to give money lessons as they do not feel financially savvy themselves. But in reality, handling money is a life skill to be built up – and the younger your child is at his or her first money lesson, the more capable he or she will be in grasping the concept of money and practicing good money habits as he or she grows up. “Lessons” can and should start as early as age 4-5.
Teaching your child the basics of money at this young age is not as daunting as it seems. Talk to him or her about money as casually as you would about brushing or washing hands. The goal for now is to familiarize your child with the concept of money and build basic foundation for some good money habits. Here are some essential money lessons you could start with at elementary age:
- You need money to buy things – Take your child to go shopping with you to illustrate this most basic lesson.
- Money can be used up – It is best to use only cash when you are around your child and to show him or her that money is limited and that you should not spend more than you have.
- You use money for your needs, not your wants – This is among the most important money lessons to teach your young child. Distinguish for him or her at this early age which buys are necessary and which are only “wants”. A good way to do this is to answer only to reasonable requests from your child, and to explain when he or she asks for something unnecessary.
- You should always save – Following up with previous lessons, explain to your child that because money is limited and you need to prioritize needs before wants, he or she needs to save to buy something he or she wants. As your child gets a little older, get him or her a piggy bank as soon as you start giving allowance and give a small saving “assignment” for your child to achieve – like saving enough to buy himself or herself a new toy.
When your child is young, it is important to communicate often when you are teaching him or her about money. Gradually, you can also involve him or her in buying decisions when you shop together to “practice” money judgment from the lessons above. As he or she gets older, the “lessons” can get into more complex concepts like long-term savings, basic personal banking and credit cards… Next week, we will explore what to teach your child about money at a later age.
Do you talk to your young kids about money? What do you think about these lessons?