Let’s Teach Financial Independence to our Kids!
Financial independence and saving money are two essential parts of life. Therefore, it is wise to teach your children about money and save money early; these are necessary skills.
A few weeks ago, our youngest son, Austin, was playing with coins putting them into a piggy bank. Unfortunately, we didn’t realize that amongst those coins was an entire roll of transit tokens worth $150!
After the shock wore off, we decided that this was an excellent time to introduce the concept of money and financial independence beyond the toy coins and money that our kids use to buy food for their pretend kitchen.
At four years of age, just understanding that coins have different values is a big step.
Financial education is a significant part of a child’s overall life education. Teaching them financial independence will help them for their entire lives.
Financial Education in Young Kids
1. Use a piggy bank or clear jar
It is a good idea to use a clear jar so that your child can see the money growing. Talk to your child and review what you see in the pot and how the money is accumulating. Seeing what they are saving can help show them how to achieve financial independence even with small coins at first.
2. Show them the value of money
Try to make your child realize the value of money. For example, ask your child to take five or ten dollars out of their money jar and go to the market (or shop online).
Physically hand over the money to the cashier to purchase the toy, book, or food product. This helps your kid in understanding the value of money. Involving your child in shopping will help teach your child decision-making skills as well. As they get older, you can review living expenses with them, so they understand how complicated it is to manage one’s personal finance.
3. Be a role model!
Remember, parents, are the role models for their kids. Set an example about financial independence for your child. Teach them saving money tips! We want them to gain financial independence.
This will help them as they get older.
According to scientific research conducted at the University of Cambridge, children’s money habits are developed at seven years. Therefore, this is the critical age, and parents should set positive experiences in saving money and financial independence in their kids.
4. Take your child to the bank
Kids will learn how to manage their personal finance and gain financial independence by saving. Taking them to a bank is a healthy strategy that helps teach your child to save money. But, first, teach them the basics of how transactions are performed and how money is saved in bank accounts.
Most children can understand that a bank holds your money to keep it safe until you can access it. Explain that what is safe in the bank is not being used, and as they grow, you can teach them about interest and how money can grow through investments.
As your child gets older, you can begin to review an investment strategy, including a tax-free savings plan. In addition, older kids may be eager to learn about retirement planning, debt consolidation, investment in real estate, and how to save for an emergency fund.
5. Show them opportunity costs
This is the central part of money training in your child. It helps in decision-making and teaches them that buying one thing may mean they cannot buy another thing with finite dollars.
For instance, teach them how to manage the budget. If they buy a video game, they won’t have money to buy a pair of shoes. That is a critical and straightforward strategy to securing a financial future. If they want their own financial independence day one day, it is crucial to learn these building blocks.
6. Teach them money is earned
This is important. We all learn that ‘money doesn’t grow on trees, but kids need to know that money must be earned as we learn as adults.
I suggest considering providing your child an allowance should they complete certain chores around the home.
Not necessarily the routine tasks like cleaning up after themselves or self-care. Take it up a notch. Perhaps your child can take out the trash, or do the dishes, or help fold laundry. This will teach them the actual worth of the money.
If you feel comfortable, you can review with them your financial situation, how you plan for financial security, your retirement planning, health insurance plans, and perhaps how you earn passive income. The more they learn, the more financial independence they will be set up for.
7. Teach them the value of giving
Show them how to give money to others for a worthy cause. Earning and saving money means we have money for ourselves and the things we want and value.
But it also provides the opportunity to help others who may not have the same opportunities as we do. This will likely also feel better for your child than buying yet another toy.
8. Teach them ways to earn
This works best for older kids and teenagers. Help your child learn the various modes of earning to allow them to become financially independent.
Teach them the necessary life skills and financial management (the proper use of money) and the important ways to save money.
Final Thought
Always remember that there is a suitable age for this training, and it varies from child to child.
Even from the time your child is very young, discussions around what we buy, how we buy it, and how we generate the funds to make these purchases can be made in age-appropriate ways. When they are little, come up with an investment strategy and make it so they can’t touch it until they’re 18. Then, they can watch their investment grow and know that they have a bright future ahead with some financial security.
When your child gets a little older, teach them how you spend money. Please show them your financial situation, show them debt consolidation, show them equal housing lender opportunities, show them your financial planner. It shouldn’t be taboo to talk with your children about money. So many people grew up in a house that didn’t talk about money or people’s issues with it.
If you own your own business, teach your children how to make tax-free decisions. Show them and tell them the secrets to money that you know so they can be as bright as you are with money and learn even more. They will soon love to learn about money and relish the ability to purchase things with your support.
FAQs – Frequently Asked Questions
How do you teach your children about living expenses?
Teaching your kid about money can be tricky, but it’s not impossible.
1) Use a clear jar: The piggy bank is great for teaching kids how much money they have in their savings.
2) Take them shopping with you, give them 10 dollars and a grocery list, and they will see how quickly it adds up.
3.) Show them that everything costs money, and show them how you make your money.
How do you teach your children to achieve financial independence if you are not financially independent?
If you’re not financially independent, teaching your children the skills they need can be tricky. However, there is a way!
You can learn together. See where you have planned poorly, and as you right your wrongs, you can plan a better investment strategy, ensure you have enough health insurance, an emergency fund, and even set yourself up with passive income. Perhaps invest in real estate. When in doubt, consider working with a financial planner who is more educated and experienced than you are. We want to ensure you have enough income to ensure financial independence when you wish to retire.
How do you teach your child to gain financial independence and how to keep it?
Financial education is an essential part of raising financially independent children. But, as you teach your kids about the importance and benefits of an economic future, make sure that it’s something they want to do themselves. Start with examining what we as adults think are their attitudes toward money.
If our messages aren’t positive or supportive enough, there won’t be any success when trying out these skills on their behalf later in life.
Next up comes communication – talking openly not just amongst yourselves but also directed towards those still developing into adulthood can only help move things along better than hiding everything under euphemisms like “finances.”
These lessons go even further by teaching them some essential personal finance tools. Financial freedom is the ultimate goal. Children can plan for their financial independence day and know what to do with their money once they get there. Hopefully, with these skills, one day, your children will be achieving financial independence and live happily ever after.
#YouGotThis
Dina is a wife, mother of 4, and adrenaline junky. She loves to share children’s health information from her professional and personal experience. More About Dr Dina.
