Teaching kids about money is a long, hard task. Make sure you are avoiding these six mistakes when teaching kids about money.
6 Mistakes Parents Must Avoid When Teaching Kids About Money
I was shocked when I first found out that our kids were not receiving any education about money and financial literacy in schools. Especially when this mama is all about frugal living and savings. It seems that manual checkbook balancing may be a thing of the past as we continue to enter into a fully automated lifestyle. I still find it essential to everyday life.
While in school, my kids learn how to write, multiply fractions, and that Pluto was once taken out of the list of planets in our solar system. Math class excludes lessons about handling money.
Parents, it is time to take action. We must lead by example.
Since the U.S. educational system isn’t too keen on teaching kids about money, that duty falls on the shoulders of us (mom and dad).
We all know that teaching your children about the value of a dollar helps them prepare for the real world. When you introduce them to a financial tool like the debit card for kids, you are setting them up for success in a world where virtual finance is becoming the norm.
Teaching financial literacy to kids, however, can get tricky. It’s not unheard of for parents to make mistakes as they impart whatever knowledge they have about money to their kids. Here are some of those mistakes, which you must avoid no matter what.
Underestimating Your Kids
Complicated financial concepts like the stock market or securities are generally not appropriate for kids, but don’t underestimate their ability to grasp the most basic ideas about finance. Go easy on the concepts you teach, but don’t talk to them like they know nothing. It makes it frustrating for them as very young adults.
Even a three-year-old is smart enough to understand the concept of monetary values, exchanges, and choices. Show them that we need to earn money to the items they need or want. Starting them off first when a simple budget will help them understand this concept. It is important for them to understand that they can not spend money that they don’t have. As they grow older, introduce more complex ideas, like what a bank account is for or how a credit card works.
Not Making Them Earn Their Money
Most parents give their kids an allowance, and that’s a good thing. What isn’t is giving your kids money without them doing anything to earn it.
One of the most important money management lessons you can teach your kids is that money doesn’t grow on trees or that it simply comes out of an ATM. Show them that they need to work for the money they earn.
Be it through chores they do or a part-time job for your older kids, working for their money is a life skill that will serve them in good stead as they enter adulthood. Helping teenagers to budget their money is especially important.
Teaching Them To Save with Piggy Banks
Teaching your kids to save money will always be a part of any financial literacy education you provide your kids.
Giving them a piggy bank to drop their coins into, however, is a bit outdated. Cute, but certainly outdated, since the world you’re preparing them for is now heavily engaged in digital payments. Practically everyone is doing their financial transactions through credit, debit cards, smartphone apps or by paying their bills online.
Instead of giving them a piggy bank, download a chore and allowance app that both you and your kids can use. That way, they’ll be familiar with “invisible money” at an early age. Digital financial transactions are the future, and that future’s already here.
Not Shopping With Them
Everything you teach your kids about money within the four walls of your home will be pretty much theory. Those theoretical ideas, however, can be put into practice if you bring them along when you shop.
If you leave your kids at home while you shop, they will miss out on a real-world demonstration of how to compare physical products and learn the difference between cost and value in the process.
Shopping is also a perfect opportunity to show your kid how cash works. Sure, you may rely heavily on credit and debit cards when you shop, but occasionally, use cash and let your kid observe how money gets the goods you want or need.
Taking your kids with you when you shop and allowing them to get in on the action is a simple yet effective way of teaching your kids about money. Showing them how to be frugal shoppers and how to save on expenses when they can.
Arguing About Money In Front of Them
It’s not uncommon for parents to have disagreements when it comes to their finances.
Keep in mind, however, that you are still introducing the concept of money to your children. When you argue (with raised voices at that) about finances in front of your kids, they will probably associate all the negative vibes your argument generates with money, making them less enthusiastic about the topic.
If you cannot avoid having an argument over the credit card bill or secret bank withdrawals, it’s always best to do so away from the eyes and ears of your kids. You don’t want them to relate money to always having to be an issue in their relationships.
Good healthy talk about budgeting, savings, and preparing for future expenses will show them that this type of discussion is important. Let them in on some financial decisions that could affect the family. This will give them a better understanding.
You’re Not Practicing What You Preach
We know that kids are very impressionable. As long as the topic of money interests them, they will take all your financial responsibility lessons to heart.
However, there will be a problem when you’re not practicing what you’re preaching to your kids.
You must teach them how important it is to understand the difference between cost and value, but they will be confused if you’re in the habit of picking up any grocery item without regard to the price. And that it is okay to impulse buy. Keeping a list, sticking to a plan and shopping for all items needed will help them better understand grocery budgeting & shopping.
You teach them the importance of spending their money responsibly, but then they see you scratch your head, not understanding how you have massive credit card bills.
If you want your kids to grow up to be financially responsible, be their financial role model. Show them the budget for grocery spending and make sure they see you’re sticking to it. Tell them about the pros and cons of a credit card and demonstrate how to use it wisely. As much as possible, refrain from teaching them things about money that you don’t do yourself so they won’t get confused.
Teaching Kids About Money
Navigating life with little to no knowledge about money and its management is tough, but as long as you pick up the cudgels of educating your kids about finance and steer clear of the mistakes listed above, they will be fine. With your guidance, they will grow up fiscally responsible, enabling them to reach personal financial and life goals they set for themselves.