Teaching Kids Good Money Habits in 2023
Raising money-wise children is not something that happens as much as it should - many of the concepts around money, finances and budgeting never get adequately introduced to us as children, and once we reach adulthood, reality sneaks up and smacks us square in the face!
The world of money and financial literacy is changing rapidly, meaning it can be hard to keep up when trying to teach your kids.
To help you navigate this constantly evolving landscape, here are a few tips to ensure your kids are future-ready when it comes to their money habits in 2023.
Definition of Financial Literacy
In simple terms, financial literacy is "the ability to understand how money works, how to manage it responsibly and how to use it wisely."
Today, it has become a necessity that children develop an understanding of the basics of finance, such as budgeting, saving, investing, spending wisely and more to set them up for a financially secure future.
Why it's important for children to learn good money habits now
After a few very hard years, global economies have been slowly trying to recover, and that, of course, has a knock-on effect on the spending habits of many families.
With this in mind, it is essential to teach your children good money habits now to equip them with the skills and knowledge to make sound financial decisions as adults.
When it comes to teaching your kids the basics of financial literacy, the most important concepts are:
This is a skill that many adults struggle with - it means keeping track of where your money is going + how much you have left over to spend or save.
Teaching children to budget their money can help them learn to be responsible with their finances and avoid accumulating debt.
Another important aspect of adulthood children will need to understand.
Saving money allows them to build up a financial safety net so that, in the event of an emergency or if they need something that costs more than they have available, they will have funds set aside.
This one is usually the doozy - it is that children understand the value of money and how overspending can lead them into trouble.
Show them how much things cost, where their money comes from, and how it needs to be spent wisely.
Identifying needs vs wants
As children grow up and grow older, they will experience different wants and needs.
A mistake that is often made is that they are either never taught or don't fully understand the difference between the two.
Needs are items required for survival, such as food, water, shelter, access to medical care and clothing.
Wants are... well, just that - they are "nice to have" items that we desire but do not really need.
This also applies to digital services or subscriptions - it is important to help children understand that these can be luxuries but not necessities.
By helping your kids learn and understand the basics of financial literacy, you are investing in their future.
You will also set them on a path to becoming money-smart adults who can make the most of the opportunities coming their way…
Engaging Young Kids in Financial Literacy
Young kids can learn the basics of finance, too - even if they don't understand the complexities yet, there are ways to help them develop good money habits:
Introduce the concept of money to kids as early as possible
Start with the basics, such as coins and notes, then move on to more complicated concepts like saving for a rainy day.
There is no need to deep-dive into each of the concepts, but introducing them at an early age can help children understand and make good decisions when it comes to their money.
Help kids learn how to save money for future purchases
To a child, the idea of delaying gratification will be a completely alien concept.
Help them understand the importance of saving and how it can help them achieve their goals in the future.
Show them tangible examples, such as if they save up for a new toy or other item, they will have something to look forward to at the end.
This is not a "one and done" job - it will take time, however, it is an important lesson for them to learn early on.
Encourage kids to save regularly
Once they have developed the concept of saving, you can show them how regular deposits into a savings account or piggy bank will help them build up their funds more quickly.
In addition, this will teach them the basics of compounding interest, and over time they will begin to understand how this all works.
Take advantage of online resources
There are plenty of financial literacy apps and websites aimed at kids, with games that teach basic concepts such as budgeting, saving and spending.
Taking advantage of these can be a great way to help your children get ahead when it comes to understanding the complexities of finances.
Let them make mistakes with their own money - this will help them learn from their mistakes
While it is important to closely supervise, offer guidance and, if need be, intervene, allowing your child to make the occasional mistake and helping them learn from it will teach them invaluable lessons.
By teaching kids the basics of finance and how to manage their money responsibly, you are giving them a very healthy head start for when they are old enough to make all these decisions themselves.
Encourage them to give back to their community by donating time or money
Another important lesson for children to learn is the value of understanding where they are and the importance of giving back.
That could be donating some of their pocket money to a charity, volunteering at a local organisation or simply gathering together old toys to give to another child who needs it more than they do - this will help them learn the value of contributing to something bigger than themselves.
Discuss financial topics together
Involving/engaging your children in conversations about money will not only help them learn more and lets them know that yours is a household that talks openly and honestly about finances.
Your child will benefit greatly from your guidance and advice, and they'll realise that the subject of money is not one to be avoided. In fact, it could open up a whole new world for them.
Make sure children understand that money isn't everything
Contrary to popular belief, money is NOT everything - don't get us wrong, it is a very nice thing to have, and it makes life a lot easier if/when you have it. However, it is not the only thing that matters in life.
Teach your children to understand and appreciate other things, such as a good education, strong ethics and values, meaningful relationships, and dedication to pursue their dreams.
With these qualities, money isn't always necessary for happiness or success.
Financial literacy is an important life skill that all kids need to learn.
Knowing the basics of budgeting, saving, and spending can help children understand how money and personal finance works throughout life.
With the right knowledge and tools, kids can learn and practice good money habits while they are young, allowing them to make more informed decisions later in life.
Introduce your children to the concept of money at an early age, help them create smart savings strategies, assist them if mistakes occur, and encourage giving back when possible.
Above all else, always remember to emphasise the idea that money isn't everything because there's no monetary amount that can substitute for experiences such as those found in developing meaningful relationships or participating in beloved hobbies.
Teaching our children financial literacy shouldn't come at a price – it should be seen as an investment in their future financial wellbeing.
What have your experiences been?
Let us know in the comments!