By Kevin Roberts
Talking to your kids about money can be a taboo topic. It’s often right up there with the birds and the bees. But a recent study by Cambridge University found children develop money habits by the age of 7. (1) This means we need to talk to our kids about money now—whether your child is a toddler or about to graduate high school.
Practical Ways To Teach Your Kids About Money
Children learn three ways: they watch, they listen, and they do. You’ll have the most impact if you use all three techniques when you teach your child the value of money.
When you’re at the grocery store, explain why you buy the off-brand cereal instead of the name brand. When you’re at the bank, explain why they keep your money and you only take what you need from the ATM. These real-world scenarios help cement the whys and hows of money in your child’s mind.
In a paperless world, children learn best when they have real money to work with. If a child knows they have $10, they can spend $5 in the store and see they only have $5 left. Because of this, always give your child cash when paying for allowances and birthdays. As your child earns money, have them split it between three jars: one for saving, one for spending, and one for sharing. When the savings jar fills up, take your child to the bank to open up an account.
Two Important Money Lessons To Teach Your Kids
Lesson 1: Delayed Gratification
You can start teaching your child the importance of delayed gratification as early as three years old. You may be thinking, “How on earth will my three-year-old understand such a complex topic?” But how often do you walk into a store and your child expects to get something before you leave? As soon as your child starts saying the words “give me” or “I want,” it’s time to talk about the value of waiting. Showing children you have to wait to get something you want means they’ll be less likely to make impulse purchases and rack up credit card debt as an adult.
Lesson 2: Save For Future Purchases
As soon as your child understands delayed gratification, start talking to them about saving for bigger purchases. If your child spends all his money on cheap toys from the dollar section, he won’t be able to save for the video game he really wants. He’ll have to think about what he wants more: a cheap toy now or a video game later. Even if your child doesn’t make the right choice at first, it’s best he makes a $10 mistake when he’s 8 than a $10,000 mistake when he’s 18.
As high school approaches, talk to your child about how (or if) you’ll contribute to college. By knowing the situation up front, your child can make plans to apply for scholarships or more affordable schools when the time comes.
We’re Here To Help
At the end of the day, you want what’s best for your child. Whether it’s stowing away money for college or saving for other major milestones in your child’s life, Roberts CPA Group is here for you. To talk more about how we can help you save for your family’s future, schedule an appointment with me online. You can also reach out to me at firstname.lastname@example.org or (502) 426-0000.
Kevin Roberts is a CPA and CFP® specializing in providing virtual CFO services to individuals, families, small businesses, and professionals in the medical, professional service, and restaurant industries. He has more than 20 years of experience in accounting and taxes, and more than seven years in the financial services industry. Regardless of the services he provides, Kevin strives to offer clients confidence knowing that their financial aspects are being addressed and monitored by professional and competent individuals. Based in Louisville, he works with individuals, families, and businesses throughout Kentucky. Learn more by connecting with Kevin on LinkedIn or emailing email@example.com.