5 Essential Lessons for Your Child's Financial Education
Updated: Sep 1, 2021
Our children are our dearest treasures, but they are also those who offer us, their parents, the greatest life lessons.
We constantly think about them, they are our source of motivation and inspiration, but they are also the biggest responsibility we have. They are vulnerable when young, but also very curious and receptive to what they learn from their parents or school.
Financial education is one of the biggest shortcomings of the mainstream educational system, so we must take this role and teach our children about money and how important it is in our lives.
If, however, you do not know where to start, here are 5 essential lessons for your child's financial education:
1. Talk to your child about money when you use it.
Act naturally with your child when it comes to money and tell them what money is. What you use it for, how you pay the bills, how the money is earned, and how it is spent.
This way they will understand the value of money and the importance of it. And don't be afraid, it is not necessary to give them complex explanations, but you can speak in plain terms easily understandable.
2. Educate them on how to make money and how to spend it.
The sooner your child understands that money comes as a result of work and does not simply exist in the wallet, the more aware and careful he will be about what to spend it on. It is important to teach them the difference between needs (food, bills) and desires (another new game).
Here, a great idea would be to give your child some pocket money that you can teach him how to manage. So, when he asks for another new game, ask him to use his pocket money. In time, he will understand the concept of saving and conscious shopping, and not solely based on impulsiveness.
3. Teach your child about priority spending.
At first glance, a child tends to think that any expense is important. So, in this case, we need to explain to him that some expenses are necessary, and some you can postpone. You can role-play games in which you present real situations.
This way, the child understands and remembers that money is the means by which we manage to survive, but that it could bring us joy too if we are thoughtful. Offer him a list of expenses you consider important: food expenses, household expenses (maintenance, electricity, gas, appliances, furniture, cleaning products), transportation expenses (bus pass or own car expenses for purchase, maintenance, washing, fuel, consumables, etc.), education expenses (school supplies, clothing, footwear, school supplies, etc.).
In contrast, teach him that a vacation or a new game is not a priority expenditure and that we can sometimes manage without them or hold onto them for a bit.
4. Teach your child what is the difference between need and desire.
Need, is the category of things or services that is essential to our survival and that helps us evolve. Instead, desire is something that would bring us joy, pleasure, or entertainment, but something that won't negatively impact our lives if it wouldn't happen instantly.
Here, you can give him different examples, about real things or situations in which you were once in. For example, a time when you wanted to buy a new pair of sports shoes compared to the ones you already owned, just because you liked them more, but the expense was not worth it now, so you had to leave it on your wish list for later.
Children need to understand that it is okay to have desires and dreams, but that expenses have to follow a specific order, so as to avoid spending it all on our desires and not having enough to pay for a necessity like food or rent.
5. Talk about saving and budgeting.
Few have a safety budget education, but it is critical to own this kind of knowledge. This way, the family will feel safe in case of a sudden unforeseen event to occur in which you would need resources urgently.
In this case, you can teach your child to have an established savings plan, so that something unexpected won't destabilize him or his future family. Additionally, combining savings and budgeting will result in a wombo-combo of being safe, while achieving our desires.
So, in the long run, this teaching will help him feel safe and will keep many future possible headaches away.
Children absorb information like a sponge, but they will learn most through imitation, so directly from your behavior, attitude, and the way you act and refer to money. If we want our children to have a healthy financial education, without limiting beliefs about money, we must instill in them a positive attitude and offer them various role-playing games that will entertain and teach them at the same time.
This is how we see it. But how about you? Do you talk openly about money around your child? How do you do that?