Finances are an essential part of our lives, but it can be tricky to know how to teach kids about money.
It’s essential though. We want our children to be financially responsible and make wise choices, but we also don’t want to scare them or make them feel anxious.
I think it’s a crime money isn’t taught in schools. It’s more important we know about the American west or medicine through time but not how to manage money?
That seems crazy to me.
Of all the life skills schools should be teaching, managing money and avoiding debt should be one of the most important.
Nothing much happens in the world that doesn’t involve money, so it should be the most important lesson in the curriculum.
But it isn’t. Money management isn’t even mentioned in most schools.
Tips to help teach kids about money
Here are a few tips for teaching your kids about money in an engaging way:
- Start early. The sooner you start talking about money, the better. Even young children can start to learn basic concepts like the difference between needs and wants, and how to save for something they really want.
- Be a role model. Kids learn by watching the adults in their lives. Be mindful of your own spending habits and talk to your kids about the choices you make. For example, you might explain why you’re choosing to buy a generic brand of cereal instead of a name brand, or why you’re waiting to buy a new pair of shoes until the sale starts.
- Make it fun. There are all sorts of fun ways to teach kids about money. You can play games like Monopoly Junior or Life or read them books about money. You can also take them shopping with you and let them help you compare prices.
- Be honest and open. Don’t be afraid to talk to your kids about the challenges of money management. It’s okay to admit that you don’t always have enough money to buy everything you want, or that you’ve made mistakes in the past. It’s part of life now and they need to be prepared.
Here are some useful conversation starters you could use:
- What do you think money is for?
- What are some different ways to earn money?
- What are some things you want to save money for?
- Why savings are important
- What are some ways to budget your money?
- What you can do to avoid debt
As your kids get older, you can start to have more complex conversations about money, such as saving, taxes, and insurance.
It’s also important to remember that teaching your kids about money is an ongoing process. There’s no one-size-fits-all approach, and what works for one child may not work for another.
The most important thing is to be patient and supportive, and to create a safe and open environment where kids can ask questions and learn.
This is an essential life skill. It’s as important as riding a bike or learning right from wrong.
Here are a few additional tips to teach your kids about money:
- Explain the different types of UK currency. Show your kids coins and notes of different denominations and explain how to use them.
- Talk about the different ways to pay for things. Explain how to use cash, debit cards and credit cards.
- Help them understand the importance of saving money. Set up a savings account for them and help them to make regular deposits.
- Discuss the cost of living in the UK. Talk about the average cost of housing, food, and transportation. This will help them to understand how much money they need to earn to live comfortably.
- Teach financial responsibility. Explain the importance of paying bills on time and avoiding debt. Share how important it is to live within your means.
Teaching kids about money will also involve conversations around debt. I recommend a similar approach, open conversations about as many aspects of debt as possible.
Teaching kids about debt and borrowing
Debt and borrowing can be tricky subjects to talk to your kids about, but it’s important to start teaching them early.
By helping them to understand the basics of debt and borrowing, you can help them to make wise financial choices in the future.
It’s likely you won’t be able to have these conversations as early as you can with borrowing. Use your own judgement on how, when and how to begin, but begin when you can.
Here are a few tips to help teach your kids about debt and borrowing:
- Start by explaining what debt is. Explain that debt can be a good thing if used responsibly. For example, people often borrow money to buy a house or start a business. However, it’s important to only borrow what you can afford to repay, and to be aware of the risks involved.
- Talk about the different types of debt. There are many different types of debt, including credit cards, loans, and mortgages. Each type of debt has its own advantages and disadvantages, so it’s important to understand the differences before you borrow money.
- Explain the importance of interest. It’s important to understand how interest works so that you can choose the best loan for your needs. Talk about compound interest, how important it is to count the cost of the entire debt and not the weekly or monthly cost.
- Discuss the risks of borrowing money. There are some risks involved in borrowing money. For example, if you don’t make your payments on time, you could damage your credit score and have difficulty borrowing money in the future. You could also end up paying more in interest than you originally borrowed.
- Talk about how to borrow money responsibly. If they decide to borrow money, it’s important to research and choose the best loan for their needs. Communicate the need to understand the terms and conditions of the loan before signing anything. And be sure to promote using a budget so that they can afford to make payments on time.
Here are some specific conversation starters you can use with your kids about debt and borrowing:
- What do you think debt is?
- What are some different types of debt?
- What are the advantages and disadvantages of different types of debt?
- How does interest work?
- What are the risks of borrowing money?
- How can we borrow money responsibly?
As your kids get older, you can start to have more complex conversations about debt and borrowing, such as how to avoid predatory lending and how to manage debt in a difficult financial situation.
Here are a few additional tips to help teach kids about debt and borrowing:
- Talk about the different types of debt. This includes credit cards, loans, and mortgages. Explain how each type of debt works and what the risks and benefits are.
- Help them understand the importance of credit scores. Credit scores are used by lenders to assess your risk as a borrower. A good credit score can help you to get a better interest rate on a loan or credit card.
- Encourage your kids to save money. This will help them to have a financial cushion to fall back on if they need to borrow money in the future.
- Be a role model. Show your kids how to borrow money responsibly by making your payments on time and avoiding debt beyond your means.
Teach kids about money – When will you start?
I won’t bore you by suggesting ways to teach kids about money, you know your children way better than I. Suffice to say, the more engaging and fun you make it, the more likely it is they’ll listen.
Use examples, use areas of your life they know, use their favourite toys or characters, use whatever props you need to help get the message across.
The better you teach your kids about money, the better quality of life they’ll have.
