Financial literacy is a necessary skill. In order to successfully navigate life, especially in our modern age, understanding personal finance is as critical as learning how to do laundry or drive a car. So it is extremely detrimental when kids graduate from high school and enter the independence of adulthood with a poor understanding of how to manage their money. Parents—or any adult who has a key role in a child’s life—can and should support a child’s development in this critical area.
If you’re wondering Where would I even start?, here are some tips for teaching your children foundational financial ideas.
1. Instill delayed gratification.
Self-control is one of the most critical characteristics you can pass on to your child. The ability to forgo small pleasures now to enjoy greater pleasures later is a crucial discipline—especially when it comes to managing personal finances.
Some children are naturally inclined to delay gratification. They do not have to be told to eat their vegetables first, and they understand that saving something they enjoy for later can help motivate them to do tasks they do not prefer. Other children need more help and practice in learning this lesson—but every child can learn it.
2. Teach them to save.
Money is fun to spend. It is not until we understand the idea of delayed gratification that we are fully able to embrace saving it. It is important to help kids practice self-control by encouraging them to save.
This means not always buying them what they want—even if you can afford it. Instead, you can work with your child to help them save up to afford an item for themselves. This approach allows them to experience working toward something and enjoying the reward for achieving it.
3. Have extra chores to earn cash.
Maybe you offer your child an allowance as a tool to help them practice managing money. Maybe your child is able to earn money by completing their regular chores. Or maybe you help your child learn valuable life lessons by teaching them to complete their chores as a contribution to the family without any payment in return.
Regardless of your approach, why not set additional jobs that they can choose to do to earn extra money? This can help children have an outlet to practice the previous lesson—when they want to work toward a special purchase. And this incentive structure can help children learn how it benefits them to go above and beyond.
4. Teach them to comparison shop.
It might seem like a pain to take children grocery shopping, but it is something you do regularly, and it can be a goldmine of teaching opportunities. As you choose items, talk to your child about how you make one choice over another. As they start to get older, you can include them in the decision-making process.
Once they are able to discern the price difference of comparable items, you can help them think about pricing per unit (is it cheaper to buy eighteen eggs instead of a dozen?) and the cost of food waste (even if a larger quantity is cheaper per unit, would you use the whole amount before it expired?). You could also do some searching online together before you shop. Are there things you need that are cheaper at different stores? Is it cost-effective to go to two stores for your groceries? Asking these kinds of questions will help your child develop critical thinking around spending money.
5. Reinforce principles of stewardship.
Christians believe that God is the ultimate owner of everything and what we have is ours to manage on His behalf. This concept is called stewardship, and it should drive the way we look at our resources.
Stewardship is easier to grasp when you see it expressed in the actions and lives of others. Not only can you teach your children that God owns everything and that we are responsible to manage our resources as His stewards, but they need to see that conviction modeled in your decisions.
When you spend money, talk to your child about how stewardship factors into your decisions. Help them understand that managing God’s resources is top-of-mind in all that you do. When they can see that it is important to you, it will become important to them.
Start early
Don’t wait until your child is a teen to start talking to them about money. You can practice incorporating these tips to build financial literacy from the time your child is a toddler. And as your children or the young people in your life grow older, you can expand their involvement and exposure to money management. As you teach and model the principles, behaviors, and benefits of wise financial practices, you are giving them an immense gift and setting them up to be successful stewards of their resources.
