How to Raise Money Smart Kids

on May 02, 2024 / by Financial Mindfulness

One of our most important responsibilities as parents is teaching our children the skills they need to thrive; financial literacy is no exception.

In an increasingly complex and consumer-driven society, instilling healthy money habits and attitudes from a young age is essential for setting children up for a lifetime of financial success and security.

This article explores strategies for parenting children about money, empowering them to make smart financial decisions and build a solid foundation for their future.

Lead by Example

Children learn by example, so one of the most effective ways to teach them about money is to model healthy financial behaviours yourself.

Be mindful of your spending habits, budgeting practices, and attitudes toward money. Children are keen observers and often mimic their parents’ behaviours.

Involve children in age-appropriate discussions about household finances, savings goals, and responsible spending decisions to demystify money management and foster a positive attitude towards financial responsibility.

Start Early and Make It Fun

Introducing children to basic money concepts early helps lay the groundwork for financial literacy later in life.

Use everyday experiences such as grocery shopping, budgeting for family outings, or setting up a piggy bank to teach children about concepts like earning, saving, spending, and sharing.

Make learning about money fun and interactive by incorporating games, activities, and age-appropriate books or videos that teach valuable lessons about financial literacy in an engaging way.

MoneySmart suggests encouraging children to save as learning to save is an essential money skill.

Piggy banks are great for younger kids. Even though money is increasingly virtual, coins and notes help kids see and understand money. They can see their money grow as they save.

Opening a savings account is a good way to introduce kids to banking, saving and interest.

There are also apps that help kids save pocket money and learn good money habits. One example is Spriggy.

According to Spriggy’s member research:

• 85 per cent of parents surveyed believe kids’ money smarts are their responsibility;
• 66 per cent of parents are reluctant to even talk to their kids about money;
• 67 per cent of parents don’t think schools are doing enough to teach kids about money.

Teach the Value of Money

Help children understand the value of money and the importance of making informed choices about how to earn, save, and spend it wisely.

Encourage children to earn money through age-appropriate chores, allowances, or entrepreneurial ventures, teaching them the value of hard work and initiative.

Use real-life examples to illustrate the concept of opportunity cost—that every financial decision involves trade-offs—and encourage children to consider the long-term consequences of their choices.

Set Clear Boundaries and Expectations

Establish clear boundaries and expectations around money to help children develop responsible money management skills.

Teach children the importance of budgeting, saving for future goals, and distinguishing between needs and wants.

Set limits on discretionary spending and encourage children to prioritize their spending based on their values and priorities.

Use positive reinforcement and praise to reward responsible financial behaviour, reinforcing the connection between good money habits and positive outcomes.

Encourage Critical Thinking and Problem-Solving

Empower children to think critically and problem-solve when it comes to managing their finances.

Encourage them to ask questions, explore different options, and weigh the pros and cons of various financial decisions.

Teach children how to research prices, compare products, and make informed purchasing decisions, equipping them with the skills they need to navigate the complexities of the consumer marketplace with confidence and competence.

Foster Open Communication

Create a safe and supportive environment where children feel comfortable discussing money-related topics openly and honestly.

Encourage children to ask questions, seek guidance, and share their concerns or challenges related to money management.

Be patient, non-judgmental, and supportive in your responses. Foster a sense of trust and openness that encourages ongoing dialogue about money matters.

Empowering Children for Financial Success

Parenting children about money is a journey that requires patience, consistency, and intentionality.

By instilling healthy money habits, attitudes, and skills from a young age, parents can empower their children to make smart financial decisions, avoid financial stress, navigate life’s financial challenges, and build a solid foundation for their future financial success and well-being.

Remember that teaching children about money is not just about imparting knowledge—empowering them to lead confident, responsible, and fulfilling lives in an increasingly complex and dynamic world.