5 Important Money Lessons You Can Teach Your Children

5 Important Money Lessons You Can Teach Your Children

If you want your children to be money-savy, and you are wondering where to start on teaching money lessons for your children, this is for you.

Have you heard of the Stanford Marshmallow Experiment?

It is an experiment conducted by Stanford that displays how delayed gratification is beneficial for a child to learn.

It instructed children to wait a little longer so they can have more marshmallows. They were also given the choice to eat the marshmallow now, but if they choose to do so, they won’t get the extra marshmallow.

The basic test taught the children self-control and as they observe those who were able to wait as they grow older, the higher their SAT scores and the better their rated social and cognitive function in adolescence. You can read all about it in Walter Mischel’s book, The Marshmallow Test: Mastering Self-Control.

Teaching your child the wisdom of handling money is beneficial especially if you start at an early age.

The younger they start saving money, the better.

Unfortunately, many parents overlook this part as this is not part of the usual school curriculum.

So, as early as four to seven years old, you can teach them to earn, save and grow their money. Here are the five important money lessons you can teach your children:

1.     Money is earned.

When kids see their parents withdrawing money from the ATM, they may think that cash is conveniently available in those machines.  When my second child was 6 years old, she once told me that if I have no money, just get cash from the ATM.

Explain to the kids how you earn the money you put in the bank before it becomes available in the machines.  After all, money doesn’t grow on ATMs!

It is way better if you consciously explain the basic concepts of money. Teach them to earn their own money too, you can pay them for small errands at home like mopping the floor, washing the dishes, or keeping their beds.

2.     Spend within your budget. 

How do you give cash allowance to your kids?

Is it on a daily or weekly basis?

It is necessary to teach kids to manage or spend their money for a given period, or else they will be penniless before the following provision. They need to budget the allowance throughout the period. 

This discipline will teach them to be frugal and shall save them from wasteful spending when they become grown-ups.  It teaches them to decide and know the outcomes of their spending habits, say, for example, if “I buy this, I will have no money for the rest of the days in the week”.

One of the important lessons about spending money is to understand what is “need” and “want”.  Your kid may want a Barbie doll, but all she needs is a doll she could talk to, dress up, and babysit.

3.     Delaying gratification.

Delaying gratification means that you delay the purchase of the treats they like to have to get a better reward in the future. 

For example, if your child wants chocolate truffle or Paw Patrol Collectible Action Figures, tell him/her the importance of waiting for the time when your budget is available. While they are patiently waiting for the goal, you’re instilling patience and self-motivation.

By doing so, you are training them to resist impulsive buys in the future. As they become mature, they will rely on cash rather than credit cards when buying goods or services. Put in the picture how unlikely is the idea of the “buy now, pay later” offer of credit cards is.

5 Important Money Lessons You Can Teach Your Children

4.     Save for rewards or the rainy days.

You can help your children reinforce the natural excitement of saving an allowance to buy something rewarding. Use a piggy bank, or a clear jar so that your child can see how his or her savings have grown each day.

When my younger brother was 9 years old, he saved some of his allowances to buy a bicycle.  Hence, when he had ample savings, my father brought him to the shop to buy the bike he wanted.

Likewise, I inculcated this idea to my kids since they were young and more often than not, they used their savings to buy something for their wish-listed stuff.  Oftentimes, they are also ready to offer their share whenever there’s an immediate and emergency financial need of the family.

5.     A contented heart is a happy heart.

Teach contentment to your children because it does not mean that the more money you have, the happier you will be. At times, when our kids start comparing themselves with others, they demand something exorbitant for us.

Explain to your children, say, for example, a birthday party, that you can still enjoy a simple celebration with family and friends without spending too much.

Now here’s my challenge for you:

  • As parents, it is our responsibility to integrate money lessons in their daily life activities. Money lessons you instill in them will help determine their financial success in the future.
  • Experts recommend that we engage them in healthy discussions about money even at an early age to develop their financial awareness, confidence and independence.
  • Aside from earning and saving, teach your children the importance and joy of giving.  They may start the habit of sharing their resources to siblings, friends, classmates, charitable institutions or anyone who need help. 

Similar Posts

2 Comments

  1. This is so relatable. In buying decisions, I always stay focused on my goal and delay gratification in order to get what is important to buy. I also starter earning when I was 7.
    👍

  2. This is so relatable. I always stay focused on my goal and delay gratification in order to get what is important to buy. I also start earning when I was 7.
    👍Good read.

Leave a Reply

Your email address will not be published.