Money Talk: What You Need To Teach Your Kids About Money
As a parent, especially a Nigerian one, you want the best for your children. This doesn’t necessarily mean you want them to have the best clothes, the latest toys, or the coolest gadgets. Most likely, it means you want them to be safe and secure. And you want to lay a foundation that they can build upon to do well in life.
The question, then, is whether you’re teaching your children a key lesson that will impact whether they will do well. That lesson is about money.
Money is central to transacting life, day-in, and day-out. Where we live, what we eat, the clothes we wear, the car we drive, health care, education, child-rearing, gift-giving, vacations, entertainment, heat, air-conditioning, insurance—you name it, money is involved.
Unfortunately, most parents miss opportunities to talk to their kids about money and finances. A survey by T. Rowe Price showed that the majority of parents are very reluctant to discuss financial topics with their children.
Kids, on the other hand, are eager for their parents to share their wisdom. Half of the children surveyed said they wish their parents taught them more about money.
Here’s how you can give your kids a head start.
Start With The Basics at a Young Age
Once your kids are old enough to know they shouldn’t be sticking money in their mouths, you should introduce them to cash. Explain what money is and how it is used. Actually, showing them how money works is more effective.
Let them see you making purchases with cash and even if you pay with a debit or credit card, explain to your kids that you’re using your money to make purchases.
When shopping with the kids, show them receipts with the amount you paid. By doing it over and over again, it becomes a habit to them. As they get older, they’ll start to understand. That’s how you introduce money to them.
Instill a Habit of Saving
Your kids’ early interactions with money will likely involve spending. They see you using it to purchase things, including things for them. So it’s important to teach them from a young age that money isn’t just for spending—they should be saving money regularly, too.
Learning to save isn’t just an essential money habit, it is a very important life skill that will give them an edge in a financially competitive world.
Teach Them Accountability
Give small children a clear piggy bank rather than using the traditional opaque piggy bank. A see-through container will help young children see their savings visually. Money is an inherently abstract concept and the more concrete you can make it for children, the better.
Create Opportunities For Them to Earn Money
Kids need to have money of their own so they can learn how to make decisions about using it. An allowance can accomplish that. However, you should consider requiring your kids to do certain chores to earn their allowance. The truth is that most people value the money they earn differently than the money they receive as gifts so it makes sense to set up a task and reward system.
Create A Budget From Their Allowance
Budgeting skills aren’t always taught at school, so it’s best to proactively guide your children as soon as they begin receiving an allowance.
There are various schools of thought on an allowance. Some people think it could either be earned based on a rate of pay done for household chores. Other parents provide spending money for their children as needed. Some parents opt for a hybrid approach where you only pay for chores that are outside what is considered “normal” everyday responsibilities.
Help your child create a budget to prepare them for bigger budgeting later in life.
Teach Kids How Their Money Can Grow
Saving money is a great habit. But if you want your kids to learn how to truly build wealth, teach them about investing.
As they become aware of money and other financial concepts, it is smart to familiarize them with investing and arm them with know-how and tools that they can take with them into adult life.
Of course, they’re still children so it may be a while before they’re ready to tackle concepts such as portfolio creation and asset allocation. However, the basics of investing can be taught when kids are quite young.
Long before your kids start checking company profiles on the internet, start by teaching them the basics of risk vs. reward, stocks and bonds, and profits and losses in a language they’ll understand.