Why Should We Teach Kids About Money?

It is never too early to teach kids about money. Having an insight into money can help them avoid financial mistakes when they grow up. Here are lessons that you should teach your children.

1. Needs vs. Wants

Needs are things that we must have to survive. For example, we need clothes to keep us warm in winter and protect ourselves from the sun. We also need to eat to provide us the energy to fulfill our daily tasks. However, we do not need unhealthy food because it can make us sick or obese. Furthermore, we all need houses to keep us safe when it rains cats and dogs or freezes outside. Life becomes much easier when we have what we need.

On the other hand, wants are what we would like to have to please ourselves. Kids are happy when they can get some candy. They do not need it, but they insist on having it because of its sweetness. Nevertheless, if we do not give our kids sweets, they will be totally fine. Same as candy, video games are what kids like. And again, they do not have to play video games to survive. They play them because they are addicted.

Teaching kids the differences between needs and wants can help them know what they should buy or ask for. If you teach them about needs and wants when they are young, you will not have to suffer from seeing them crying when they do not get what they want. The lesson of needs and wants will also help them when they grow up because they will know what they should buy and what they should not. Hence, teach your children this lesson now before they have bad spending habits.

2. Spending vs. Saving

Spending means you exchange money for desired products or services. We spend money to buy what we want and need every day, such as gas, food, water, clothes, makeup, video games, etc. In contrast, saving occurs when you keep your money for expensive items or emergencies. If saving is more than spending, your life will likely be fine. However, if you spend more than you save, you will tend to struggle when you need money to do something important or necessary.

Your kids may not understand why they should spend or save money because they are living with you. As parents, you protect and provide basic needs to them no matter what happens. However, it does not mean that you should not teach them about spending and saving. We should teach them how to spend more correctly, so they will understand the value of money. Your kids should understand that if they spend all their allowances, they will not have money to buy what they want now, or they will have to wait another day or week to get more money. Furthermore, they should always save their allowances to help them create good money habits. In other words, they may have to deal with emergencies when they grow up. If they save money and prepare for the worst-case scenarios, they will overcome problems more easily.

3. Budgeting

Budgeting means managing your money, which can help us use our money smartly. You can teach your kids to divide money into three parts.

The first part is giving. In this case, giving refers to help. Your kids can spend a little bit of their money to donate or give it to poor people whom they see on the streets. It not only helps them understand budgeting (because they cannot spend all their money to help others) but also teaches them to do good things.

The second part is saving. It is necessary to save money, so your kids can spend it later on expensive items or emergencies. As parents, you should always remind your kids of saving no matter how much money they have. We never know what will happen in the future, so it is good to have some money to spend in case we need it.

The third part is spending. Now, your kids can spend the rest of their money buying what they need. As our discussion above, we should not encourage them to buy what they want. Spending should not be the first or second part because we may spend all our money before we can do something else. Therefore, it is good to teach your children that they should spend their money after giving and saving.

Conclusion

It is extremely important to teach kids about money, so they can understand its value. It not only stops them from spending their money crazily but also helps them understand how hard we have to work for our money.

I have created a series of money management classes for kids. If you are interested, please click here to schedule a section with me. Also, if you have any questions about this topic, please feel free to ask me or MindPhoers at the PHORum.