How many times have you said to yourself, “Dang, I wish I would have learned this when I was younger?” That statement often coincides with financial matters. Unfortunately, you can’t go back in time but you can teach your kids about money while they are young so they can have the educational advantage you didn’t.
It’s never too early to teach your kids about money. In fact, the earlier your kids start learning the basics of finance the better.
Children can learn more than just how to count, add, and tell the difference between coins. Too many parents avoid teaching their kids more than the basics because parents just don’t think that their child will be able to understand.
If that sounds like you, give your kids the benefit of the doubt!
They can learn facts about money that even adults don’t know yet. I’ve created “The Ultimate Money Playbook for Kids,” found in our free resource library, to help you get your kids started. I’ll explain further below.
How to teach your kids about money
Your goal as a parent should be to raise your children into happy, functioning, and independent adults. Without building a foundation of financial knowledge, your child will struggle.
Since you are reading this right now that tells me that you are already aware of the importance of a good financial foundation for kids. That means that your kids are going to have a great head start as they grow older. Way to GO parent!
Here are 8 tips to help you guide them to success.
1. Teach the importance of saving
Learning how to save money is usually the very first thing that kids have to learn. We all know that saving money is important.
When you begin to teach your kids about money and the importance of saving, you are teaching them a core principle of finance. You can begin this lesson simply by having your child put money into a piggy bank or jar. As they get older, you are going to want to teach your child to intentionally save a percentage of the money they earn or are gifted.
The problem here is that saving money is BORING for kids. Why save it when they can SPEND it? To encourage spending, consider having them set a savings goal and then matching the money they save.
Saving money isn’t the end goal though. Making saving money the sole focus of finance is a mistake that a lot of parents make. You should encourage your child to have a goal for their money – like putting their money towards an investment.
2. Explain investing
Adults make investing sound too complicated. Most of the adults you encounter don’t even know how to invest themselves. Occasionally, I bring up stock investing to other adults. I’ve heard, “I’m too poor to invest” countless times from other adults.
This statement just makes me sad and angry that so many educators have failed these people.
If you don’t already know, you can literally buy stocks for less than a penny. How can someone not afford less than a penny? The problem isn’t lack of money, it’s a lack of education.
Teach your kids the basic version of what investing is. Investing is an attempt at making your money make more money.
Of course, investing requires that you take a risk (aka a chance- which is easily explained to kids in “The Ultimate Money Playbook for Kids” download.) However, there are very low-risk investments where the possible reward outweighs the risk.
3. Actually make investments happen
When I first told my 11-year-old son that he had to invest some of his money, he acted like I just threatened to sell his puppy. You see, my son doesn’t have an issue with saving money. He’s very good at it.
However, the thought of putting his money somewhere he couldn’t physically hold, with the possibility of not getting it back, freaked him out.
I explained to him that there is a risk, but that risk is normal. That day we looked at individual stocks. He was surprised to see that there were video game stocks and stock for his favorite restaurant chain.
Suddenly, he was interested in investing. But after looking around at different stocks, he started to get overwhelmed.
“Feeling overwhelmed is normal,” I told him. I then explained that picking individual stocks is challenging for even professional investors.
Then, I pointed out an index fund. Straight from my Robinhood app, I showed him how he could buy a share of an index fund, which would invest in multiple stocks at once.
Immediately, he loved the idea and fully understood how investing in the stock market worked.
Now, you may be wondering how a child can invest in a stock market. There are many different custodial accounts you can choose from. One way is to set up a custodial account. A custodial account is set up in a child’s name but is ran by a parent. With a parent, your child can invest in the stock market.
Keep in mind that the stock market isn’t the only investment option available. There are plenty of investment options for kids and they can even invest in starting their own business. Last year, my 7 and 10-year-old each started their own businesses and invested their own money into it.
In “The Ultimate Money Playbook for Kids,” you’ll find an inspiring and true story about a child who started their own very famous business. Again, don’t underestimate what kids can do!
4. Keep it fun and simple
Boring will be the death of your child’s education. Unfortunately, finance is generally looked upon as a boring topic.
If you are going to take the time to teach your kids about money (or anything, really) you want the knowledge to stick. The best way to make a lesson stick is by making it fun!
Back when I was in the 11th grade, I took a German language class. During that class, I truly learned how well people can retain information while having fun.
The German teacher used a unique technique when she taught her class. Her theory was that when you are learning anything new, you will learn best by starting from the skill level of a child.
As Juniors in high school, our class was naturally headstrong. You can imagine everyone’s feedback when the teacher made us sing “Head, Shoulders, Knees and Toes” in German like we were little kids.
Now, all these years later, I can tell you I’ve forgotten most of the stuff I learned in high school. But, do you know what I can still remember? How to sing “Head, Shoulders, Knees and Toes” in German.
Fun stuff sticks.
Check out this video of a “game show” we created from “The Ultimate Money Playbook” terms to help our own kids remember their financial education:
You can make learning fun by using interactive workbooks, playing games, coloring, and more.
5. Download “The Ultimate Money Playbook for Kids”
This is a FREE workbook that my kids and I created to help kids learn financial terms without feeling overwhelmed. “The Ultimate Money Playbook For Kids” is probably the most uniquely fun money workbook you’ll ever find.
The workbook features stories, funny one-liners, easy activities, critical thinking, and game ideas. Created for kids, by kids.
I recently taught my children these terms at 8 and 11-years-old. This book is geared towards youth, but all ages will be able to benefit from it.
To download the playbook, fill out the form below and you will be instantly emailed a password to our free resource library. If you are already a Family and FI subscriber, you can just download it straight from the library.
6. Inform them about the money “game”
If you’ve ever read the best selling book, “Rich Dad, Poor Dad,” by Robert Kiyosaki, you would have heard about the idea of money being a “game.”
Kiyosaki explains the mindset differences between rich people and poor people. He goes on to say that rich people look at money as a tool, but poor people view money as a lifeline. This is a very valuable lesson to learn as early as possible.
The truth is that money is just paper. It takes just $0.12 to print a bill. The earlier we teach our younger generations to have a mindset that views money as a tool instead of a lifeline, the better off they will be.
If you are hearing this for the first time or don’t yet understand that mindset yourself, I strongly recommend getting that book and reading it. After you’ve read it, then teach your kids about the money game.
7. Allow failing
Schools teach our kids that mistakes are bad. Think about it. If a child gets an answer wrong on a test, they are punished for it with a bad grade.
Contrary, in the world of entrepreneurship, mistakes are the best way to learn! I challenge you to research a business you find successful. You will probably find that the creator of that business experienced many failures before their success.
Failures are lessons you can quickly learn from.
8. Be open about living expenses
It costs money to live. There’s no way around it.
A simple way to start showing your kids the cost of living expenses is just by letting them in on the bills you are already paying for.
For example, show them your receipt next time you buy something that is taxed. They will see that they will have to pay taxes one day too.
You can also let them help you fill out the next payment form you have to send in for your insurance company, medical bill, or etc. Allowing your kids to see that living costs money allows them to better understand why managing money is going to be an important skill.
In other words, one day they will also be lucky enough to pay bills – so they’d better listen up!
Depending on your child(rens) age, you will naturally need to adjust your teachings to an appropriate method. The most important takeaways here are to make learning fun and to not put a limit on what your child is “too young” to learn.
Lastly, if you would like to download, “The Ultimate Money Playbook For Kids,” fill out the form below.
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