Five Things You Should Know About Teaching Your Kids About Wealth And Money
Money can be such a taboo topic in households.
Well-intentioned parents often avoid talking about money because they don’t want to cultivate their kids to have an unhealthy relationship with money.
But the worst thing you can do is to stay silent around the topic of money with your kids. With children as young as two to three years of age having some level of awareness of money, it pays (no pun intended) to discuss matters around money and wealth.
Frankly, not talking about money with your children ultimately means that they end up getting the information elsewhere. Which means that they’re at the influence of peers and media that they consume. Unless your framework around money is more robust, then they’re at risk of adopting world views around money outside of the home.
As someone who has young children, as well as being a daughter to my parents, I’ve learnt many things along my wealth journey that I’ve adopted to help foster a healthy relationship with money.
#1 Kids and Money – Actions Speak Louder than Words
I believe in the adage – watch what I do, not what I say. Which is ironic given this is an entire piece about how to talk to your kids about money.
But children are like sponges. They observe what people do, and either copies them or have an allergic reaction to them.
Personally, I experienced a little bit of both as a child.
There were money habits I felt were great that picked up from my parents, and there were others that I didn’t resonate with.
It doesn’t matter how good you are with your money if you don’t have the words to impart that wisdom or don’t demonstrate habits to support your children with learning money management from an early age.
#2 Accept That You Can’t Control Everything
What’s also important to understand is that as parents, we need to be comfortable with accepting the fact that there are no guarantees with children when it comes to money.
Inherently, some are cautious with money while others can’t help but spend all they’ve got.
A great mentor of mine once told me – the best you can do is to hope you can shape your kids’ money habits over time so that when they’re out in the real world, earning their own money, that you’ve implanted enough wisdom that they can run with it themselves.
But the fact of the matter is, people are born with specific spending and saving tendencies.
#3 Three Core Elements to Money Management
Money doesn’t need to be complicated.
1. Respecting Money
Teach and demonstrate a healthy respect for money.
This even boils down to fundamentals like not leaving money lying around or scrunched up.
Have you and your kids keep money in a place that’s kept safely and help them understand how money is accounted for. Even a small ledger that shows how money comes in and out has a lot of power behind it.
2. Spending Money
Spending shouldn’t be demonised.
Instead, have rules around spending while still giving your children the freedom to spend money.
From an early age, my husband and I taught our kids to ensure that they put away a certain percentage of anything they received into a long-term savings accounting or a piggy bank.
At an early age, we taught our kids to put away three-quarters of what they received and only spend a quarter. As they got older, this has slowly shifted to 30 – 50% as the world of material possessions start to attract them to spend more.
Regardless of what the case may be, having rules in place will provide guard rails for them and avoid finding themselves with nothing left.
With this, you harness the power of habit and ingrain great money habits which eventually become second nature.
3. Amplifying & Investing Money
As my children are still in their teens, this is an element where we’re yet to talk about fully.
While we haven’t discussed specific investments they can undertake, I’ve encouraged them to embrace and learn the idea of investing particularly investment property.
What’s important is to focus on not over-complicating things and have them lose interest.
And this will be something we start to ramp up as they get older and begin to venture out into the real world.
I find games like Monopoly and Cash Flow Quadrant are a fantastic way to help develop stewardship overall around money.
Not only do they maintain interest, they’re simple enough to understand but complex enough that it’s relevant to real life.
#4 How Early Should I Be Teaching My Kids About Money?
As I said, it’s not uncommon for young children, at the age of two to three, to have some level of awareness around money.
I recall my eldest child, at the age of four, kept disappearing underneath his bed. When we eventually took a look, we discovered he had stashed a wad of $50 notes that were tucked away in the back corner!
He’d discreetly taken money from our wallets when we left it lying around, and despite having no objective with it (he was only four, after all!), he seemed to have some sort of understanding that there was value in it.
Teach them earlier than you think.
#5 How My Parents Taught Me About Money
My mother had the most significant influence on me when it came to money.
When I was four (there’s that number again), I remember stealing a ten-pence coin from her purse because I wanted lollies.
Somehow, she knew I had taken it, and I vividly recall her saying to me, “Salena, don’t ever take money. If you want it, you just ask for it, and I’ll always give it to you.”
My parents always taught me about principles such as having a healthy relationship with money and being generous with it.
As I grew older, I realised I enjoyed spending.
And this is why I mentioned I was deliberate in talking about accepting that you can’t control everything when it comes to money – that being a good steward doesn’t necessarily override natural tendencies.
I inherently enjoyed the idea of spending, and this was something that was part of my personality rather than being shaped this way.
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The important thing is not to make your children feel bad if they’re someone who does or doesn’t enjoy spending.
Instead, teach your kids ways to manage money, regardless of spending tendencies, and you can ultimately help them become great stewards of money.
The most significant mindset to teach your children is to ensure they understand that money shouldn’t be coveted as a tool to gain power.
Instead, draw parallels between money and freedom.
Having money should be a tool to control your time, who you want to be in the world and supporting and influencing others for good.
Start early. Be proactive. Have rules.
Do this, and you’ll go a long way to helping your children succeed with money.
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