There’s so much taboo and mystery around money which is starkly at odds with how frequently we use it. Regardless of whether parents actively set aside time to teach their children about money or not, they still inadvertently teach them. Children pay attention to what their parents say and do, and they learn a lot from those interactions. This is why it’s important not just to verbally teach them but to model the right things. Here are some mistakes to avoid when teaching children about money.
Mistake 1: Not talking about money
For most people, talking about money is difficult and even worse with children. Plus, most adults were not taught any financial literacy when they were younger. The problem is not teaching children about money is setting them up for financial disaster. Financial literacy is too critical to leave up to chance or someone else such as their school. Talk to children about budgeting and saving, and answer their questions. The key thing is openly talking about it so that it ceases to be a taboo subject.
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Mistake 2: Making money feel mysterious
One negative effect of using plastic money around children is how mysterious it ends up looking, you just swipe a card and get stuff. It’s even worse when it comes to online shopping where you just click and it’s delivered. This can make children think that money is just always around no matter what.
Teaching children about money should include the fact that it’s not always there. This is why it’s best to use cash around children, they see the actual transfer happening and the fact that you essentially ‘lose’ the money in order to get the thing your purchase. They see that money is finite and must be used wisely.
You could also explain where the money comes from, as in people work and they’re paid. Depending on how radical you are, you could explain why certain people have money (billionaires/millionaires) and others don’t (poverty/inequality) courtesy of capitalism.
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Mistake 3: Lying to kids about money
One study found that 28% of parents admit to lying to kids about money. They lie when children ask direct questions about money. They say things like “we can’t afford that,” when they really can instead of just saying no. Don’t just say you can’t afford it, explain why. Is it that you haven’t budgeted for it or maybe it’s truly not necessary or wise to spend money on that? Lying may be helpful in the short term but long term, it only causes problems. Teaching children about money should be grounded in honesty if nothing else.
Mistake 4: Not making it practical
Some parents are deliberate about teaching their children about money, they give them an allowance and talk to them about things like saving. However, very few parents if any include their children in setting the family budget and other family expenses. Make budget management a family project so that children see the practicalities of running a household and keeping everyone alive. One woman told me about making a budget as a family and each child knowing how much was allocated to them for things like entertainment and eating out. Expense tracking then makes sure the budget isn’t broken so that each child knows that if they exhaust their share, they’re done.
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Mistake 5: Impulse buying
Focus on modelling-wise money practices. For example, don’t make impulse purchases. This shows children that they can just splurge and spend money willy-nilly. Plus, it’s important to teach children delayed gratification.
Mistake 6: Failing to see that money stresses kids too
When teaching children about money, it’s important to recognize that money stresses children too. One 2014 study found that teens greatly worry about money. They worry about whether their parents will be able to continue affording things, especially during harsh economic times. When parents are stressed children get stressed too. Children’s anxiety is further compounded by the fact that they don’t understand finances. Look out for this and address it.
Here are other general mistakes to avoid
- Forcing your kids to save money: they’ll associate it with negative feelings.
- Micromanaging their spending: once you give them money, it’s theirs, just let them spend it as they wish.
- Assuming children won’t understand financial concepts. They will, just take your time explaining it in simple terms.
- Not talking to children about charitable giving. It’s important to teach your children practical compassion while reminding them how exceedingly fortunate they are to not lack.
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