Finances, money, value… they’re an unavoidable part of life. For all of us they start at birth, given what family you are born into.  Even when you are still in your mother’s womb, you are affected by money and finances.  Did she have a way to access health care before and during her pregnancy? Were there resources to access healthy food, and safe shelter? (Hamilton, Sariscsany, Waldfogel, & Wimer, 2023) Financial lessons can either be taught at home, or learned the hard way in the school of life. Which do you think is more likely to be helpful for your kid?

Granted a savings account hasn’t been a lucrative way to save money since I was in diapers, if not before. It is an important way to ensure that you are prepared for life’s little emergencies. Whether it’s a surprise school trip, or a new tool for your hobby or project, or the dreaded car repair, having some money stashed away, yet easily accessible, gives you the choice to simply deal with whatever it is and move on. As opposed to it being a crisis that impacts your family negatively for way too long.

For the sake of your child, their future partner and family, open a savings account and teach them to add to it regularly. Even (and especially) if you weren’t given the gift of this lesson yourself. Break the cycle, choose better for your child and help them learn to navigate life better than you do. Leading by example is great, or at least teach them to do better with their life and choices. Play around with a calculator to figure out how much interest you can earn, this is a good one from Nerd Wallet.

How to Make Money – A Useful Life Skill

As a child gets older, teaching them HOW to make money becomes more important.  It’s important that children learn the financial lesson that you EARN money, in exchange for something. Whether it’s mowing lawns, selling crafts or programing electronics, kids need to feel that they are creating value, and receiving value in exchange. The corollary to this is don’t short change your kids.  Paying them fairly teaches them their self-worth and how to price their labor. That means paying for their actual labor, plus some. The point is that you want them learning how to negotiate about getting paid for work as an adult.  If, as adults, they accept that they only get paid enough to cover their work, they’ll never get ahead in life.  They’ll learn that work is just to have something to fill their time, rather than a means to an end. 

They could learn that work is where you do things that allows you to do MORE fun and necessary stuff. Paychecks allow you to make investments, get ahead, live life and have fun.  Then their overall outlook on life will be so much healthier. It’s the difference between thinking that you can work a low wage job and barely cover your expenses, versus thriving. 

Self-worth is Learned at Home

We’re starting to work on their self-worth and to understand their value in society.  Giving a child spending money doesn’t allow them to learn the basics of how to live a healthy financial life. 

Paying them poorly (for example giving them a quarter for making their bed) teaches them that they aren’t able to do things that are worth a decent amount of money.  They will perennially undervalue both their contributions and their value.  To put it plainly, this method teaches children that they aren’t capable of doing things that are worth much money. As adults, they will lack the ability to get a good job, and demand fair rates if they are self-employed.  They will expect those who pay them are unwilling to pay very much. And that they are only capable of doing very minimally complex jobs. It’s a shitshow. You don’t want that for the young people in your life. 

Everyone Can Contribute Meaningfully

Start when they are between 5 and 10 years old to ask them to do actually valuable things. Then pay them fairly for what they do.  Allow the learning experiences to happen.  If they legitimately don’t do the job as agreed, you can have a calm discussion about docking their pay. Or explain that there is extra money available if they do an exemplary job. My point is that this is a critical moment in time. You get to teach children things that will affect them for the rest of their lives.  Don’t screw them up. 

Teach Your Kids to Save and Spend Wisely

As a child starts to earn money, and has a desire to spend it, you have another golden opportunity. To teach them the financial lesson about how to split their earnings between savings and spending.  How to comparison shop. How to wait until a thing is on sale. And how to decide if it’s a momentary desire, or if it’s a valuable investment in their life. All of these are life skills. 

I won’t say that life revolves around money. However, money is our society’s agreed upon way to measure value and transfer value between people. If you have enough money to be financially healthy then life becomes a lot more fun and interesting. (see my earlier post about financial health for more information),

If you lack funds to pay your bills, or if you can pay your bills but can’t afford anything else. Life is much more difficult and stressful.  That stress can in turn take a toll on your physical, mental, emotional and environmental health.  It’s not a difficult concept as an adult to grasp, yet a young person can struggle.  It is challenging to understand the importance of setting yourself up to earn sufficient money for financial health.

All that to say, stay in school kids, and don’t do drugs.

~Every After School Special in the 1980’s

Really though, as adults we see some youth seem to intuitively understand this financial truth and some who don’t.  How can you help a young person to understand why and how to set themselves on the path to success? 

Financial Skills are Part of the Bedrock of a Successful Life

While the bottom line is that your child will need to develop two things. They need useful, monetarily valuable skills and the self worth to price them appropriately. It is also true that they need to learn to budget and shop wisely. A person can make loads of money, and have their utilities shut off because they failed to pay the bills. Childhood is where we teach our kids to understand their wants and needs. We do this whether we want to or not. Your child may WANT cookies for dinner, however, they NEED a healthy meal. Not a terribly financially related example, yet one that is relevant to every parent and child everywhere.

By age 10, they will understand that there are things they want for their birthday, holidays, etc. You can help them manage these lists. Setting up categories, such as books, clothes, toys, school supplies and so on is one way to do it. Once they are earning their own money, you can teach them to save some of it for bigger purchases. There are many ways to teach and reinforce these lessons. Choices range from old school piggy bank, to savings account, or one of the new apps.

Always Look for the Best Deal

When you arrive at the purchasing stage, help them do some online comparison shopping and check reviews. They’ll decide if they still want the item, or if they’d rather do something else with their money.

What kind of financial lessons can a child learn in the first ten years of their life? They can learn to save in a savings account. And then they can learn to make a list of things that they might want to buy.  They can learn to go to comparison shops and wait for a sale or coupon before buying something.  They can learn to differentiate between wants and needs.  Kids can learn to contribute productively and in value based way to their family and community.

As they move into the teen years, more financial lessons await. They can learn more about their earning power, ways to spend money, and taking care of themselves.  Then they can set bigger saving and spending goals. They can and should start to learn about building credit and investing for the future. 

I hope you enjoyed this piece. Share your thoughts below to let me know. Or sign up for my seasonal newsletter and get ideas for taking advantage of every season of life.

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References

Cvencek, D., Meltzoff, A. N., & Greenwald, A. (2016, 01 22). When do children show evidence of self-esteem? Earlier than you might think. Retrieved from The Conversation: https://theconversation.com/when-do-children-show-evidence-of-self-esteem-earlier-than-you-might-think-53325#:~:text=Our%20research%20has%20developed%20new,before%20they%20even%20enter%20kindergarten.

Hamilton, C., Sariscsany, L., Waldfogel, J., & Wimer, C. (2023, 08). Experiences of Poverty Around the Time of a Birth: A Research Note. . Retrieved from Demography 1: https://doi.org/10.1215/00703370-10837403