Parents do their best to give their children everything they need. Excessive indulgence can be harmful to kids though, and they can grow up without understanding the hard work needed to earn one’s living. Such children can spend all their weekly pocket money on ice cream for friends in one day, safe in the knowledge that their parents won’t leave them without a penny (or mao in Beijing). It’s also tough for parents to deal with the exhausting cry of a kid asking to buy another Barbie doll or LEGO set during the usual evening grocery shopping. And the worst thing about this upbringing is that adults without good money habits also become an easy catch for all types of swindlers. The main inference here – parents DO need to talk with children about money.
So when is the right time to start your kid’s “economic education”? We think, the earlier the better. It would be great for a child to participate in serious discussions with parents, and he or she will appreciate it if you ask them what, for example, is the most important purchase for your family budget now, and what can wait till the next month (or holiday). If you think you kid is too small for that – just start by telling him or her what money is, and how to distinguish coins and notes.
Many of us still have the same view on money we used to do in childhood, given to us by our parents in turn. A research team from the University of Minnesota have created a list of things you need to concentrate on during the preparation for the “money issue” talk.
First, decide how to create an open environment for a discussion.
Try to remember what words and explanations you would have liked to hear when you were your kid’s age, and make the conversation easy to follow. Sometimes kids want to get a different answer than you’d give to an adult. For example, if your child asks how much you earn, he probably doesn’t want to hear the actual numbers, but will better understand it in the currency of toys. Another tip – in all circumstances it’s better to guide and advise than dictate and direct. Your kid has a right to make her own mistakes, and will definitely have her own special traits and differences which need to be taken into account.
Then a good idea would be to develop a plan of how your kid will get their pocket money.
There is actually no one universal approach for all families: some just give money to their kid on request, some set a monthly or weekly sum, some pay for doing household duties or offer some other ways to earn, and some present money on special occasions.
So, having prepared your strategy, you can start teaching your kid money concepts.
There are only five of them: earning, saving, spending, borrowing, and sharing. And if the first three are quite easy to understand, getting the meaning of the last two might take some time, and usually those skills are developed after at least few years in Elementary school.
Earning money is a first important step for a child to an adult life that gives them sense of independence and freedom, together with inculcating good working habits and work-life balance. It is crucially important for a kid to feel the support of his family. It is good to negotiate the level of your help to a child once they start to receive their first paycheck and to slowly withdraw it, as they become more independent. Explain to your kid the importance of keeping records of all financial income and outgoings.
Putting money aside for future spending is a great habit your child should develop. There are two types of saving: for short-term purchases, like a new game, and for long-term needs such as college. And while kids are usually fine with putting some ice cream purchases aside in order to get a new toy, you should help your child to understand the necessity of long-term saving. For this purpose, different motivational techniques can be used, like recording annually how much he saved and adding some extra money from your side.
Spending money is a hobby we all share. Explain to your kid the difference between real needs and wants. And show them that sometimes you also need to say “no” to yourself, for example, during your shopping together. For a child, spending money means he or she is taking on responsibility for their decisions, and that’s great training for a future life.
Getting your child familiar with what borrowing is can be tough, and it’s important for them to understand the basic principles of it. First, if you’re lending money to your kid, you need to make sure they are able to return it. There shouldn’t be a situation where you just forget about the loan – to make them understand the realities of the credit market and prevent future inconveniences that may arise.
The last concept, sharing, is also important. Tell your kid, that it’s not always necessary to get public attention. The best way to show how good for both giver and receiver sharing can be is participating together in different community and charity events.
Following this advice should help your child to grow up a successful and happy person with good money habits.
Source: University of Minnesota