Who is responsible for teaching children about money?
Should it be taught in schools, where so much of their day-to-day learning happens? Or should parents (who may be figuring out finances themselves as they go) be the ones who instil the values of personal finance?
Gregg Murset, a certified financial planner, says it certainly should be discussed in school, but home is an ideal ecosystem in which to teach children about money.
Why? Because at home, money theories and lessons can be put into practice. “You have the people that need to learn and the money source living under the same roof,” Murset says. “Your teacher at school is not going to give you money.”
Are you ready to introduce — or build upon — smart money lessons with your kids? The following tips from experts can help you talk to kids about finances at every stage of their growth and share guidance that really, well, hits home.
One of the most important aspects of teaching children about money is to create age-appropriate lessons by introducing concepts in ways that will both resonate and actually be understood. But, as with most life lessons, some of the strategies are appropriate for all ages.
“One mistake I think a lot of parents make is they just hand their kids money with no strings attached,” says Murset, who feels simply handing over money can confuse a child’s ability to understand how money actually works.
Murset, a father of six himself, suggests that before you simply hand over money to your child, consider what they can do to earn it. AED 50 to go to the movies? Then you ask them to wash the dishes in exchange for the money.
Another consideration for all ages: Determine what motivates your child, advises Melody Bell, Ed.D, CEO and founder of a non-profit that teaches people about financial well-being.
“The important thing to remember is that lessons are most effective when they are relevant to the person learning them,” advises Bell. “Pay attention to what’s going on in your child’s life, what motivates them, and be on the lookout for money lessons that align with life lessons we all experience as we grow up and mature.”
Regardless of what motivates your child, all the experts agree that the earlier you start talking with your kids about the value of money, the better.
4- to 6-year-olds
Lessons: Distinguishing needs and wants; exchanging allowance for action.
Parents may think preschool to kindergarten is too early to discuss finances, but your children are already learning some of the important basics like wants vs. needs.
“My wife and I have lived by the philosophy that the earlier you speak with your kids about money, the better,” says Andy Hill. “Knowing that financial habits are formed by age 7, we were teaching smart money lessons to our kids by age 4.”
Hill and his wife used the grocery store and other shopping experiences as a way to teach their two youngsters, now 5 and 7, about the difference between needs and wants.
“We need clothes, water and food, but we don't need a pack of trading cards, even though they might be awesome,” jokes Hill.
While it might sound quite young to start talking about money with your pre-schooler or kindergartener, kids this age can easily contextualize doing an action (such as a chore) in exchange for money as well as exchanging money for something they want. Hill’s rule of thumb is to “pay” AED 4 per year, so his 7-year-old would earn AED 28 by completing three to five age-appropriate chores around the house.
Once his children earn their allowances, Hill has them set 10% aside into Give Jars, and once a quarter each child gets to pick a charitable foundation to donate his or her money. Hill and his wife will then match the donation. The couple also have their children save 10% of their allowances.
As your children start to understand the general concept of money, the next step is to let them start making decisions.
7- to 10-year-olds
Lessons: Entrepreneurial thinking and allowing the child to make decisions.
It’s important for you to start figuring out what motivates your child and marry those motivations to earning, saving and spending. A classic example is going back to Murset’s earlier point of not simply handing over money and instead encouraging your child to both earn and save in order to buy items or experiences he or she wants. Bell deployed this technique with her daughters.