Despite understating the importance of discussing financial topics such as saving money and spending money wisely, about 36% of parents remain reluctant to talk to their kids about finances, T. Rowe Price’s 13th annual parent, kids, and money survey revealed.
More than half (56%) of the parents surveyed said they are not inclined towards talking about finances to their children because they believe that they are too young to understand what it is about.
But children as young as three years old can already grasp financial savings and spacing, an article from Yahoo Finance said.
Teaching kids at a young age about finances also carries “tangible benefits” for them, especially when they enter adulthood, according to Campbellsville University.
The university said kids who “learn to manage their finances early and often become adults who are better equipped to live independently.”
Some parents (27%) said they want to leave it up to the schools to teach their kids about savings but aren’t parents supposed to be a child’s first teacher?
For parents who don’t know where and how to start educating their kids about finances, here are simple and practical ways to teach them about building their nest egg:
Teaching kids that they can’t have something simply because they want it will help them realize the importance of money. Rather than just buying your kids directly their wants, you can make them work for it.
If your kid wants to buy a toy, for example, ask them how much is it and tell them how much work they should do in exchange for the money they will need to buy the item. By doing so, kids will realize that money is not something just given.
Apart from just stacking up money for a rainy day, it's also important to teach your kids to spend smartly. Let your kid be a part of your grocery shopping.
Let them know how much you will be spending and allow them to help you select which items you should buy. Present them with two similar items and try to explain the difference between the two, in terms of price and quality, so they could better compare.
Parents can also have their kids on the table during budget talks.
Leif Kristjansen, founder of FiveYearFIREescape, told NBC News that the best way to teach kids about money is by bringing them in on a budget discussion.
“They will see how you responsibly handle all of life's pile of bills and issues. Kids naturally want to emulate their parents so they will start to think about spending and how to minimize it,” Kristiansen said.
An article from EdNavigator said a reward system could entice a child to adopt new habits and behavior; this can also be applied in teaching kids about finances.
For instance, if you gave them money on their birthday, ask them to keep it or set it aside. If they can do so, you can incentivize them by putting more coins in their piggy bank; this could somehow be your entry point in introducing investments to your kids.
Parents can also do the “contribution” method to motivate their kids to save, according to Investopedia.
“One of the reasons people save in their employer’s retirement plan is the company's matching contribution. After all, who doesn’t like free money?… You can use that same principle to ramp up their effort,” Investopedia author Rebecca Lake wrote.
“If your child has set a big savings goal—for example, a $400 tablet—you could offer to match a percentage of what they have saved. As an alternative, you could offer a reward when your kid reaches a savings milestone, such as a $50 bonus for hitting the halfway mark,” Lake added.
For more wealth-related content, you may download Pulse for free both available on Apple App store and Google Playstore or visit www.wedopulse.com/ph/.
References:
1. T. Rowe Price’s 13th annual parent, kids, and money survey [April 19, 2021]
Available from: https://www.slideshare.net/TRowePrice/t-rowe-prices-13th-annual-parent-kids-money-survey
2. 10 Tips for Teaching Your Child to Save Money [Internet]. Investopedia [June 21, 2021]
Available from: https://www.investopedia.com/personal-finance/10-tips-teach-your-child-save/
3. How to teach young kids about money so it sticks with them [Internet]. NBC News [June 28, 2019]
Available from: https://www.nbcnews.com/better/lifestyle/how-teach-young-kids-about-money-so-it-sticks-them-ncna1023231
4. Benefits of Financial Literacy for Kids [Internet]. Campbellsville University [October 14, 2016]
Available from: https://online.campbellsville.edu/education/financial-literacy-for-kids/
5. Your child is never too young to learn about money [Internet]. Yahoo!Finance [January 14, 2017]
Available from: https://finance.yahoo.com/news/your-child-is-never-too-young-to-learn-about-money-150732186.html
6. What Parents Need to Know About Rewarding Hard Work and Good Behavior [Internet]. EdNavigator [December 5, 2019]
Available from: https://www.ednavigator.org/resources/what-parents-need-to-know-about-rewarding-hard-work-and-good-behavior
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