Parents are responsible for teaching their kids a lot of things: how to tie their shoes, the proper dining etiquette, what to do after getting an unwelcome gift. However, while all these lessons are essential, some parents cover them while skipping the most important: how to handle money. Here are the six top reasons why parents need to teach their children financial literacy.
1. Kids Develop Their Habits Early
According to Cambridge University behaviour experts, children establish money habits by age seven. And those practices follow them into adulthood—which means if your son or daughter doesn’t learn how to save, minimise their expenses, or work for a future reward, he or she will likely struggle financially once a grown-up.
2. Kids Copy Their Parents
When it comes to money in the home, we’ve got a classic case of “monkey see, monkey do.” You may tell your daughter it’s important to limit your non-essential purchases, but if she regularly sees you going on shopping trips for fun or making impulse buys, those behaviours are the ones she’ll emulate.
3. Kids Learn from Negative Experiences
It’s tempting to give your children everything they ask for—after all, isn’t the whole point of parenthood to provide for your family? Nonetheless, in the long run, giving your kids “everything” will deny them the opportunity to make their own choices.
For example, if you give your son $30 to buy lunch for the week, he’ll quickly learn he can’t spend $10 on candy on Monday if he wants to have money left for Friday.
“Let them take responsibility for small amounts,” Clinical psychologist Dr Elizabeth Kilbey said. “Allow them to make mistakes. It is the best way to learn.”
4. Kids Benefit from Budgets
Want your kids to be less stressed, wiser, and more prosperous? Teach them how to set and follow a budget. Unsurprisingly, research shows having a plan helps people avoid pitfalls—as well as relieving anxiety and increase their overall health.
Experts recommend giving your children an allowance and having them make weekly deposits into three jars or envelopes is a winning strategy. One for short-term purchases, one for medium-term, (depending on age, this would be something like a more-expensive toy or a pricey piece of clothing), and one for long-term expenses (like college or a summer program.)
5. Kids Need to Change Their Views of Money
Today’s children are digital natives. The vast majority of them shop online—yet almost 75% say they rarely or ever visit a bank. Because they’re more likely to buy things with the click of a button or the swipe of a credit card, kids have a harder time conceptualising the value of money. It’s important you show them purchases made online or with a card “cost” just as much as purchases paid for with cash.
6. Kids Don’t Have Other Options
Unfortunately, there’s a lack of sound financial education in schools; almost two-thirds of parents call it “poor to fair.” If you don’t teach your children financial literacy, they’ll develop their ideas about money from TV shows, books, movies, songs, and their peers. Unsurprisingly, the results of this self-education are pretty negative. Only 41% of teens feel they can budget, 34% know how to pay bills, and 26% understand basic credit card principles.
The number one reason parents say they don’t talk about money with their children is that they don’t want them to worry. But when you shield your kids from the truth, you deny them the best opportunity they have to become smart, financially literate adults. So go on, and show them the money.