On any given day, you likely make a minimum of one or two financial decisions, and for most people probably way more. Grabbing that cup of coffee in the morning before work, stopping by to fill up the car with gas on the way home or deciding on a new car to purchase — big and small, financial decisions encompass our lives. Even though children depend on their parents to make these decisions for them, it is never too early to model mindful financial decision-making to your child.
A study by researchers at the University of Cambridge concluded most money habits are already formed by the early age of seven. This places most of the responsibility on parents and caretakers to teach children about saving, spending and making smart decisions with what they have.
Beth Koblinger, author of the New York Times bestseller Get a Financial Life suggests parents begin teaching and modeling mindful spending and money management to children as early as three years old.
At these early stages, teaching children the concept of delayed gratification is key and Koblinger suggests making this evident to children by not buying them something every time you go into a store just because they ask for it.
Simply create a situation where your child learns that they must save for that toy, book or treat they want. For example, Koblinger suggests labeling a few jars at home: One for saving, spending and giving. Whether your child gets money by completing chores, a birthday gift or just loose change you give them, teach them to split the money they receive into these jars. Once they have saved enough or have enough you are willing to match, let them go purchase the item they want.
While it is more than OK to treat your child sometimes, by walking them through these steps of saving, you are helping build a foundation for healthy financial habits.
It is also important to emphasize sharing their money as well. Maybe you know someone that is going through a hard time, or there is a family friend that needs cheering up. Let your child decide how they would like to help that person using their “giving” jar. The concept of giving is just as important as saving and spending and should be taught early on in a child’s life.
As your child gets older and is able to understand more in-depth concepts of money management, make sure you take the time to explain why you make everyday financial decisions. For example, make it a point to go to the gas station that is a little farther away from the house but is cheaper, and explain to your child why you did this.
Although the extra few minutes may not be worth the savings to you, it is a great opportunity to teach and model good spending and money saving habits.
Some parents may choose to start giving a small allowance to their children as early as six or seven years old. Whether they earn this by completing weekly chores or receive a couple of quarters or dollars you give them, let them choose how they want to save, spend or give.
Another idea is to let your child help you grocery shop. Give them a couple of dollars and let them choose the vegetables they would like best based on the amount of money you give them. Simply involving your child in your everyday financial decisions will help them learn to be attentive consumers.
As your child gets older and reaches the teenage years, Koblinger suggests teaching them more in-depth concepts of saving such as compounding interest. Most youth are very hands-on so help them start a savings account once they have enough money.
This can illustrate how their money can grow the more they save. When it comes time to look at colleges, guide them in analyzing all of the aspects of making the decision including the cost. Help them understand the costs as well as the resources available to help cover these costs, while encouraging the value of the education.
Each stage your child is in can be an opportunity to teach them how to mindfully manage their money. This, in turn, can create a solid foundation for even bigger financial decisions down the road and will likely help them live a more successful life.
Hale ’Opio Kaua’i convened a support group of adults in our Kauai community to “step into the corner” for our teens, to answer questions and give support to youth and their families on a wide variety of issues. Please email your questions or concerns facing our youth and families today to Esther Solomon at firstname.lastname@example.org. For more information about Hale ‘Opio Kauai, please go to www.haleopio.org