How Should You Teach Your Kids About Money?

With widespread technological advancement, the world is transitioning into a cashless economy. Cards like Spendsafe Debit Card have made the payments easier without carrying cash. When everywhere the trend is to go cashless, it has raised some questions on how to impart financial knowledge to the children of tomorrow. As per the financial literacy assessment of 2015 done by the Programme for International Student Assessment (PISA) around 80% of the 15-24 age group made online payments.

Another report from Standard & Poor survey found out that only around 57% of the US adults are financially literate with a good understanding of main concepts like interest and inflation. Only when parents would discuss financial topics with their kids, they would become smarter about money. Some of the timeless values that parents can teach their children are “pay yourself first”, “save 15% of your earnings” and “live within your means”. In this article, we would tell you how you could go about educating your child regarding money.


For ages 3-6: Introduction of money

At this age, a child goes through cognitive development and you can introduce the concept of money and counting. The four essentials your child should learn at this age are described below:

  • Earning– A 3-year-old cannot take up a job to earn, however, they can earn a trifling amount by finishing simple chores like cleaning their room or bed. Offer them the allowance only when they complete the chore.
  • Spending– When your child learns how to spend responsibly, it empowers your child and upgrades the decision-making skills. Kids become careful in spending their earnings. 
  • Savings– When your child starts earning their own money, they would learn that few things are expensive than the others. They should learn how to save for larger goals.
  • Giving– You should inculcate the charitable habits at an early age as that can be rewarding for your child. Teach them to give at least 10% of their money to help others.


For ages 6-10: How people generally spend

At the age of 6, your children begin to understand the cause-and-effect of relationships. They are acquainted with the facts like parents work for money, money is directly attached to items, and money is spent differently. Between 6-10 years of age, you should introduce the differences between types of spending and that will help in laying the groundwork for future budget building.

  • Services vs. Goods– You should make them understand that money is not always spent on physical goods; instead, they are also spent on another’s services. 
  • Wants vs. Needs– Most of the customer purchases are made due to emotions and vendors are aware of it. Therefore, establish the difference between emotional purchases and necessary needs.
  • Short and long-term goals– Monthly payments for the cost of a house are crucial and it is a great way to introduce the idea of the expense. Encourage them to save for their long-term goals.


For ages 11-13: Introduce consequences:

At this age, the child begins to develop a sense of reason for long-term consequences. They crave independence and therefore, you should introduce the following aspects at this age.

  • Credit– You should tell your child that if they cannot afford to pay cash, they cannot afford it. Make sure your child makes the payment of credit cards every month.
  • Debt– Teach your child to be actively aware of the debt and ask them to track their spending by saving the receipts. With your experiences about debt, you can educate your child effectively.
  • Interest– Teach your child that interest means that the value of money grows over time. Hence, they should not overspend, instead, save money for the future.
  • Budgeting– Take a stock of your child’s spending habits and teach them about aiming at long-term goals. It is a great idea to teach them about monthly profit and loss.


Ages 13-15: Building up wealth

When your child turns to teens, they develop abstract concepts. They begin to distance themselves and identify more number of friends. At this age, you should help them identify the following things.

  • Work– Your child knows that money comes from hard work, but until now they were earning only through chores. When they start earning a separate job, you should open a bank account for them and keep track of their money.
  • Banking– Your child should know who is keeping their money safe. Therefore, it is advisable to choose a bank with a local branch, so that you and your child can visit the bank and ask questions.
  • Investing– You should also teach your children to take risks. Keep the lessons simple and easy to understand. Teach them in detail about the stocks and bonds where they can invest their money.


Ages 15-18: Prepare them for the real world

At this age, your child can process complex problems and imagine future consequences. Hence, you introduce the following aspects.

  • Taxes– When your child starts working, they already run into taxes. Hence, you should teach them how to file taxes and why they are important.
  • Good debt– Good debts are long-term investments that enhance a person’s net worth. When you plan to take loans and mortgages, do your research with your child so that they can understand better.
  • Bad debt– Bad debts are liabilities. Hence, you should teach your child to pay the credit card bills and car payments timely, so that they do not face serious consequences.

When your child will understand the personal financial works, they would be confident to make bolder moves. It will also help your kid to grow up financially.


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