Food & Receipts

Expert Shares 3 Ways to Teach Kids about Money for a Successful and Wealthy Future

Teaching children about money is an essential task for parents, but not everyone knows how to do it.

25 February, 2024

160

Money is a measure in life. Experts believe that children can understand money from the age of 6 and money habits are formed from the age of 7 onwards. Knowing how to manage money and having good financial plans will help ensure happiness, success, and wealth for children in the future.

Alex von Tobel, the founder and managing partner of Inspired Capital, a venture capital firm, was trained at Harvard University. She believes that parents should teach their children about finance as early as possible.

In 2008, while studying at Harvard, Alex von Tobel founded an online financial advisory company called LearnVest and sold it for $375 million to Northwestern Mutual. Recently, she collaborated with the children’s media brand Rebel Girls to write a book called Strong Smart Money: Money Matters for Kids. It includes personal finance lessons for children and advice for parents on how to talk to their children about money.

Children who are not taught about finance and do not have financial skills will pay a high price when they grow up. According to Alex von Tobel, there are three most important pieces of advice for parents on how to teach children about money:

Parents should teach children about money in a practical way

Many people think that teaching children about money early will make them materialistic. Many people believe that money is not important, but Alex von Tobel says, “Parents need to talk about money in a practical way so that their children can grow up with a healthy relationship with money. Teach children that money is worth caring about but not the most important aspect of life.”

Money is actually a means to help us achieve the life we want. Teach your children that if they want money, they need to work hard. Teach them that to buy something, they need money, and that money comes from their own hard work. Alex von Tobel shares her view: “Money is not meant to be worshiped, but that doesn’t mean it’s not important.”

Parents should teach children about money in relation to daily life

Children find it difficult to understand abstract knowledge, so you need to teach them practical things. For example, talk about the prices of everyday items, such as noting that a bottle of water costs 5,000 VND at a grocery store but costs tens of thousands at the airport. This helps children visualize and understand better.

Alex von Tobel says, “When you’re walking past a store and your child wants something, pick it up and show them the price. This one costs $29. Today Mom doesn’t have $29 to buy this, but we can think about saving that amount of money for your birthday.”

These simple ways help children understand that not everything is easily attainable and that they need to save. Pay attention to the price of things that we can afford.

Teach children saving in a fun way

Teach your children to save by saving up for the toys they like. For example, if they like a certain toy but don’t have enough money, instead of immediately giving them money, encourage them to save gradually until they have enough to buy it.

To make children enthusiastic about saving and budgeting, Alex von Tobel suggests that parents talk about it in a fun way. Ask them what they want to spend money on, discuss different ways to save money to be able to afford what they want.

According to Alex von Tobel, early financial knowledge can change children’s lives.

Many parents often avoid talking to their children about money because they think it is a practical issue. But in reality, life revolves around money, and without the skills to manage and save money, life can become difficult.

Frequently asked questions

Teaching kids about money is important for their future financial success. Here are three expert-recommended ways to do this: First, start early and make it a habit. Introduce the concept of money and its value early on and make financial discussions a regular part of your family routine. Second, lead by example. Kids learn by observing, so be a good role model by practicing good financial habits yourself, such as budgeting, saving, and responsible spending. Third, provide practical experiences. Give them opportunities to earn, save, and spend money wisely. This can include allowance, part-time jobs, and involving them in family financial decisions.

Start with the basics and keep it simple. You can begin by teaching them the names of coins and notes, and their respective values. Use everyday situations, such as grocery shopping, to explain the concept of money and how it is used to buy goods and services. You can also introduce the idea of saving by setting small goals, like saving for a desired toy or treat.

Involve them in age-appropriate discussions about family finances. For example, when creating a household budget, explain the process and involve them in setting aside money for different expenses. You can also include them in decisions about family purchases, such as a vacation or a new car, and explain the financial implications. This helps them understand the value of money and the importance of budgeting and saving.

You can start by giving them an allowance in exchange for completing chores or achieving good grades. This teaches them the value of work and earning. Encourage them to save a portion of their allowance by setting a savings goal, such as buying a desired item. You can also introduce the concept of compound interest by offering to match a portion of their savings, simulating the effects of investing. Additionally, consider opening a savings account for them to teach them about banking and long-term saving.

Teach them about needs versus wants. Explain that some things are necessities, while others are optional. When they want to make a purchase, discuss the pros and cons with them and help them make informed decisions. You can also set spending rules, such as a cooling-off period before buying something, to help them avoid impulse purchases. Encouraging them to compare prices and look for deals can also foster a sense of financial responsibility.