8 Ways to Teach Financial Independence to your Child
Let’s teach financial independence to our kids!
Financial independence and saving money are two essential parts of life. It is a smart idea to teach your children about money and save money early, as these are necessary skills.
A few weeks ago, my eldest son, Dylan, was playing with coins putting them into a piggy bank. We didn’t realize that amongst those coins was a full 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 three 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.
Financial education in young kids
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 jar and how the money is accumulating.
Show them the value of money
Try to make your child realize the value of the money. Ask your child to take five or ten dollars out of his/her 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 the money. Involving your child in shopping will help teach your child decision-making skills as well.
Remember, parents, are the role models for their kids. Set an example about financial independence for your child. Teach them saving money tips! 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. This is the critical age, and parents should set positive experiences in saving money and financial independence in their kids.
Take your child to the bank
This is also a healthy strategy that helps a lot in teaching your child to save money. 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 till you need to 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.
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, then they won’t have money to buy the pair of shoes.
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.
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 to your child than buying yet another toy.
Teach them ways to earn
This works best for older kids and teenagers. Help your child learn the various modes of earning to allow him or her to become financially independent. Teach them necessary life skills and financial management (the proper use of money) and the essential ways to save money.
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 and how we buy it, and how we generate the funds to make these purchases can be made in age-appropriate ways. They will soon love to learn about saving money and relish the ability to purchase their things with your support.
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