Conversing about money with children is a topic that is both awkward and confusing. Some parents are of the opinion that children should be shielded against any money-talk, that’s for the grown-ups, while some do want to introduce their children to money-matters but aren’t sure how to and at what age. Children will learn different things about money at different ages as they grow. But before they do, it is critical for them to develop the right perspective towards money and finances. And as parents, the onus is on us to help them learn to handle money confidently and responsibly as they grow.
I have started imparting little lessons on financial wisdom to my 8-year old twins, so that when they enter adult world they are equipped with the right perspectives and knowledge about earning, managing and spending money.
13 ways to teach children aged 7-12 about money
Allow them to see real money
I do pay for bigger purchases using my debit and credit card (invisible money) when I am by myself, but as a rule I pay for smaller buys by cash when I shop with my children. I allow them to see the cash, hold the cash and pay the cash at the counter. Seeing and holding hard cash makes it more real and relatable and they also get to know “how much” it takes to buy things.
Encourage saving and contributing
Putting money in a piggy bank is a standard feature in many households, So is it at mine. However, the twist here is that I encourage them to make a small contribution towards big expenses like vacations, it may be an amount as small as 500 bucks right out of their piggy bank. The kids discuss among themselves and decide a contribution. The only rule is they have to contribute. Once in a while they also offer to take me out for ice-cream (they buy me the cheapest one because they have little money, and that’s totally fine). The smile on their faces speak a lot of their pride.
Let them know if something is not affordable right now
Being a functional single mother, I am almost always hard-pressed when it comes to finances. There are times when I can’t afford something that the kids may want, I let them know about it without guilt or shame. It’s okay not to be able to buy everything that others own. Its not something to be ashamed of or angered about. I also talk to them broadly of our financial goal and timeline as a family.
Separate core values from money
I make conscious efforts to keep our core values separate from finances. I will never buy them a iPad or personal phones, till they reach an appropriate age. This is not because of a “money factor” but because of my “value factor”. Children must be clear when it comes to our beliefs and values as a family, that some choices and decisions are independent of our financial position, and it will not change.
Show the opportunity cost
I often let my children make a choice between two wants. I tell them if they really want the puzzle game, then we won’t be able to buy the new bag, and let them decide which is more important for them. This encourages the children to prioritize wants, weigh decisions and understand the possible outcomes.
Show them the joy of giving
Saving and buying things for yourself gives joy and children know that. What they must also know is the joy that comes from giving things to someone who needs it more than you do. We regularly give copies and stationery to few school going children who stay in a nearby slum. They have now begun to see the joy in giving, the happiness is seeing the other children smile and the pride in being able to help. The message is loud and clear, to give what you need is a big heart and not a big pocket.
Discourage the sense of entitlement
Our children are a privileged lot. They see abundance and indulgence, and often develop a sense of entitlement. They may throw a tantrum when they are denied a gadget that they demand or are asked to do a chore. It is important for them to learn that they are not entitled to the luxury and life they have. It is important for them to hear an occasional no. As a rule, our children are not allowed to instruct our domestic help to do errands for them, without my consent.
Link allowances with behavior and chores
Pocket money is not an entitlement. It is an allowance that is linked with behavior and chores, just like my salary is linked with my input at work. That’s easy to understand and enforce. A nasty tantrum or unfinished classwork could become the cause of allowance-cut. Children might resist it in the beginning, but will eventually come around.
Share what you do to save money
Children, often in their ignorance, feel that parents have a “lot of money” and can do “whatever they want”, not knowing the hardships the parents have go through. Apart from big investments that count as savings, I also share with my children the savings we make when we buy used furniture or books from OLX or travel by Uber share. It is vital for children to know that though parents earn and have access to resources, they are still careful when spending, and do adjustments and compromises for the larger good.
Let them be your partner in planning
I partner with my children when we plan a big expense, such as an AC or a vacation. I let them know that we need to save up to be able to afford the vacation at the end of the year. This way they have a clear idea that to be able to enjoy at a future date we need to save today, and saving is everyone’s responsibility, not just the parents.
Trust them with little money
Dealing with money is very important to get confident, comfortable and aware financially and children must be introduced to the concept of real money at the right age. I trust them with a little money and a
Help them differentiate between expense and investment
Letting children know that as a parent I am investing in their education and other activities that helps them learn a vocation and develop a passion. I do not cut corners when it comes to buying books or subscriptions that are in sync with their needs, sensibilities and my values. I also spend on their training for sports and other games. These are ‘investments’, while an Xbox is an ‘expense’ and one that is not in line with my parenting beliefs.
The best things in life aren’t charged
I help my children see the brighter side of life that needs no money. Having money itself may not give us the happiness that friends, family, vacations, reading, volunteering, and swimming can. Helping children appreciate the intangibles in their formative years can go a long way in forming their perspectives about money, and value things that money can’t buy.
Trust me, it’s not a mean thing for a parent to be doing this! It’s a fair way to get you child ready for the real world. It is about giving your kids a financial head-start by teaching them to understand money from an early age.