Teaching kids about money

At what age should you start teaching kids about money? My answer to that question has always been “as soon as you can!” Before I explain this further it’s really important that I address the main reason kids don’t learn good things about money. The major obstacle that prevents kids learning healthy money habits has always been the parents. That’s right, it’s you that’s the primary problem. How can we expect our children to learn healthy money habits when the ones they look to for guidance are struggling or fighting or complaining? Step one to teaching kids about money is fix yourself first.

I have found that involving my kids in financial discussions has helped them to develop a healthy attitude towards money. What are ways you can do that with your kids?

Involving them in grocery shopping is an easy and practical way. How about you develop a roster where each child has responsibility for managing the grocery budget for a week or fortnight? They could check in with each family member to make sure they have the list of items that are needed – we don’t want Dad running out of shampoo! Then they could check with Mum what the meal plan is for the week, (or perhaps a sibling who has that responsibility.) From all of this information they can develop a shopping list. There are plenty of online tools to do this, from smartphone apps to supermarket websites. But the clincher is this – they must be shopping to a budget.

One of the most important lessons you can help a child to learn is that money is a finite resource. It doesn’t grow on trees. The magic machine that spits money out of a wall is not an endless supply that can meet their every need. It’s important to plan what you do with your money so it doesn’t run out. Planning to buy groceries for a week to a fixed budget amount teaches kids this lesson well. We tried this in the days before smartphones and website shopping which meant our kids had to go around the supermarket with a pencil and a calculator!

If your children are younger I recommend you apply this exercise differently. I’m a big advocate of including children in discussions where they can be included in making decisions. Planning a ‘Family Fun Day’ is a perfect time to discuss options with your children. What would they like to do for the day if you put $30 of coins on the table and led them in a planning discussion? You’ll be surprised how quickly they come to realise that a handful of gold coins won’t allow them to do everything. But when they are empowered with choice they can learn to make good decisions within safe boundaries.

Ultimately, you’re the one who is the best teacher because you’re the example they see most often. To raise a wise generation we must first learn to be wise ourselves.

(This article was originally published in Phil’s regular column in the Waikato Times newspaper.)