The first step in teaching your child about money is to help them understand how it works. Meet them where they are by incorporating money lessons into their favorite games. Monopoly, for example, is a great tool to teach children how to financially strategize for the long term, be frugal and invest to build wealth as well as influence. These are important lessons that translate well into life. According to research by the University of Cambridge, children can understand basic money concepts from the age of seven. If still very young, you can start by teaching them the value of every denomination and its purchasing power.
Other than using games, be real with how money is made from your point of view. Instead of just using the old saying of money doesn’t grow on trees, show them how paychecks work by showing them a paystub. This can be a great lesson for understanding how trading time for money helps families build wealth. If you are a business owner, consider showcasing how services are needed to build partnerships and communities. The point of helping children understand how money works is to ensure they know how to efficiently and effectively spend resources to successfully achieve goals.
Teach Them To Save Money
Children ought to learn how to save money from a young age. As a parent, you can introduce them to saving by buying them a piggy bank and showing them how it works. If possible, weigh the piggy bank often to show how saving accounts grow over time. Alternatively, having a coin counter on the piggy bank helps to put the overall balance in frame of reference. If a relative gives them money, encourage them to save it to buy something when they hit a certain target. So, instead of buying that 10-dollar toy, let them save up and buy it with their own money.
You can also set up a savings account for your family where everybody has to contribute a certain amount weekly or monthly. This is a sure way to teach them the importance of saving. Having a custodial account is a great way to fast track how much they can have saved by the end of teenage years, and even well into adulthood. Use the power of compounding interest and put something away monthly, quarterly or even yearly. $10 invested every month for 18 years can grow to over $3,500 very conservatively at 6% growth rate. This amount of money can help pay for college books, or even be a 3.5% down payment on a $100,000 home. If you have started savings for your child, show them the balance over time and work with them to understand just how much they can use that account to build a better future life.
