3 Simple Teaching Moments You Can Share with Your Children

By Equity Trust Staff0 Comments

 
It is never too early to begin teaching our children about finance. The need to start saving early is covered at length and many reports detail how our country, and especially the younger generations, struggle with financial literacy.
 
It can be easy to write-off financial literacy as something that our children “don’t need to worry about yet” or surmise that “no one ever taught me about finances and I learned just fine.” While our children may not need to take courses or be involved in in-depth financial discussions, John Schmoll outlined three everyday events that can become teachable moments in a recent article for DailyFinance.com.
  1. When you turn down your child’s request to buy something, don’t stop at no
    1. The all-too-familiar temper tantrum is a moment that Schmoll says needs to be capitalized on. If you can explain why you are saying no, by explaining the bigger picture of the family goals or the importance of saving your purchases for things that are truly important, you can help children understand that wanting does not mean the same as needing.
    2. Quick tip: The classic parental response of “because I said so” will not suffice here. Take the time to teach your children the reasoning behind your decision and you will help build more thoughtful, prudent spending habits in your children.
  1. Money isn’t free – Set up Save, Spend, Share Accounts for your children rather than a simple allowance
    1. The article cautions that allowances may set the children up to believe that they are entitled to money, especially for those who did not have to do chores around the house to earn the allowance. Setting a plan that allocates money to save, spend, and share teaches basic principles of financial planning and demonstrates the true cost of purchasing an item by portraying the trade-offs that occur. If they want something now, they can use money from their spend account but must realize that it is less money they will have down the road. It will teach them the importance of budgeting and teach them how to make their money work for them.
    2. Quick tip: Don’t just provide your children the money they need. Make them earn it, budget it and make decisions according to their plan. You are the one providing their first income, make sure it is framed appropriately so they are prepared for their future income decisions.
  1. Involve your children in financial decision making
    1. Rather than dismissing your children during the “grown-up talk” you can use your financial decisions as teaching moments. Our children observe us constantly and form their understanding of the world from our words and actions. If you involve your children in financial decisions (you don’t need to be extremely detailed) you can begin to teach them about money, what is important to the family and how the financial decision making process works. Also, giving them part ownership in the process teaches them responsibility and provides the groundwork for their financial decisions of the future.
    2. Quick tip: Be a good role model for your children. Their first experience with financial decision-making will likely be the one you provide, make sure they are a part of it.
Watch this video to see how two Equity Trust clients have involved their daughters in financial decisions and empowered them to begin saving for their future at a young age.