Teaching Your Kids

Teaching Your Kids About Money Matters

The prospect of teaching your kids about money can seem like a daunting task, especially when you look at your own finances and the steep learning curve it took to get you to where you are. Children aren’t exactly rational creatures; they want what they want, and they want it now. In a world chaotically ruled by the need for instant gratification, how can you instil a rational understanding of money? Let’s take a look....

1. Appreciating the Value of Things

Imagine that you won a nice watch. Most people would be really grateful for the prize because they understand its value. But, give a free watch to someone who has an obscenely large trust fund with a collection of watches that stretches into the 100’s and they will, in all likelihood, not appreciate it. Value is all about perception and if you teach your children that they can have all the things they want by saying “yes” to every toy and sweet they point at, they won’t develop an appreciation for value. As such, your child’s money education should begin with the explanation that the things they want cost money and money needs to be earned. This can be done a number of ways, which we’ll take a look at in the next point. With this understanding in mind, your children will come to value and appreciate the gifts you do give them as treats.

2. Effort and Reward

If we want money, we have to work for it. This is an inescapable premise in life and it’s not something your children should be protected from. If your child wants, for example, a new toy, they need to be prepared to earn it. How they earn it is entirely up to you but it is a good idea to involve physical cash at some point so that they can learn how to handle money. Some ideas include:

  • Giving your children a weekly or monthly allowance, which they can spend as they see fit; however, once it’s spent, it’s spent!
  • Establishing a monetary reward system for good behaviour, great school results, etc.
  • Paying them an agreed-upon amount for doing certain household chores.

Simply getting your children to help you around the house or do better at school will teach them that effort is required to achieve the things they want. Treat them every now and then, yes, but as a rule, your kids should never believe that they can have anything they want simply by demanding it.

3. Can’t Afford it? Too bad!

Giving your kids pocket money is a great way to teach them to handle their own money affairs. However, with financial independence comes financial responsibility and if they spend all of their money in one go, they need to deal with the consequences. Children should learn how to pace their spending and to save for the things they want. For example, if your kid has his eyes on a really expensive Lego kit, give him a savings jar and teach him to put aside a portion of his pocket money every month until he can afford to buy it. This could be subsidized by the money he earns by doing household chores. Savings exercises are really important because they set a child up with the entire rational framework behind life’s most important financial lesson: things cost money and money needs to be earned.

4. Set a Good Example

A parent should provide their child with everything they need, which means clothes, food, shelter, education, and love. Everything else is a want and it’s a parent’s responsibility to teach a child, from very early, on the difference between want and need. This means not giving in to your child’s every whim and desire but it also means setting a good example for them to follow. Going on extravagant shopping sprees when you can’t afford to, isn’t going to teach your child restraint, especially if you follow up this behaviour by lamenting your money woes.

Set a good example for your children and engage in healthy, positive conversations about money. These conversations won’t only ground your children in the reality in which they live and set them up psychologically for their future, but will also help them appreciate the gifts you do give them, which will make your next visit to the toy aisle a lot more of a pleasure!


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