Teaching kids to be smart with money gives them vital life skills. Parents have the power to shape a child's relationship with money; thus, it is essential to start them young. They must be shown where the money comes from and taught how to budget, spend and set saving goals.
The practice of saving money is an essential life skill, but it is not one that always comes easy. A 2021 survey by LendingClub revealed that as many as 54 percent of American adults were living paycheck to paycheck, with little or no money for future needs.
Teaching kids about delayed gratification, especially when it comes to money, can help them guard against unnecessary spending and learn to value building control of their money.
According to a survey by the American Institute of Certified Public Accountants (AICPA), two-thirds of parents said they paid their children an allowance in 2019, with kids earning $30 per week on average, based on five hours of chores. This allows kids to earn and save money which provides them with the opportunity to learn how to use it.
When allowances are exchanged for chores, children learn the value of their hard work, per Investopedia.
Set saving goals
According to a study published by the UK Government's Money Helper Service, children's early experiences with money can hone their financial behavior as an adult.
University of Cambridge study found that by the age of seven, most children can grasp the value of money, delay satisfaction, and understand that few choices are irreversible or will cause them difficulties in the future. The research recommends that children who are allowed to make age-appropriate financial decisions and experience spending or saving dilemmas can build positive habits of the mind, especially regarding money.
Such could lead to a long-term improvement in their ability to plan and be reflective in their thinking about money, or they may learn how to regulate their impulses and emotions in a way that encourages positive financial behavior later in life, per The Guardian.
Young ones might keep their savings in a piggy bank, but older ones keep their money in a bank or debit card while working on their goals.
The essence of saving money
Parents must help kids to track their spending as part of being a better saver means knowing where your money is going. Having kids write their purchases every single day and adding them up at the end of the week can be an eye-opening experience.
Encourage kids to think about how they're spending and how much faster they could achieve their saving goals if they change their spending patterns.
According to Juliette Collier, a national director of the charity Campaign for Learning, it is worth giving a child as young as three or four their own coins to handle, spend, and save. If a child wants to spend money on sweets, then clarify that they can't spend money on something else. Let children make choices and experience the consequences.
The earlier you start a child's financial education process, the better. Lessons should begin before reaching the age of seven because money habits and attitudes are already formed by ten, per Forbes.
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