10 ways to teach your kids about money

Don't be surprised (or annoyed) if your kids, especially the younger ones, have zero idea how money works. They are so used to seeing us just tap our card or phone on a machine, and “Poof!” - what we want is “paid” for. Or press a button on a keyboard, and “Whoosh!” - what we want is delivered to our doorstep. They rarely see physical money change hands for everyday transactions. We are living in the digital age, after all.

The more we abandon cumbersome notes and coins for quick and convenient digital payments, the less our kids get to witness physical money change hands. It's hard not only for kids, but for anyone to understand how things work if we are just fed the theory without the application. So here are 10 simple ideas you could use to start educating your kids about money, how it works and how to manage it.

1. Role play

Kids love role play and this is a really fun way to introduce them to ‘real money’. Set up shop and take turns to be shop owner and customer. Give them real money to manage so that they can experience first-hand how money works when we buy and sell goods or services. Once they grasp the concept, perhaps then you could level up the role play to include digital payments. Explain to them that when we tap our phone or card instead of using notes and coins, we are allowing ‘real’ money to be taken from our account by our bank to pay the seller, and vice versa. Same goes with online shopping and clicking on ‘Buy now’.

2. Go shopping

Prepare your shopping list, set a budget, then take your kids shopping with a clear goal – to get everything on the list without breaking the budget. Bring along a big calculator if you think it will help them to crunch the numbers. You could add some fun into it by asking questions like “Guess the price of this?”, “Which do you think is a better deal?” and “Have we compared the prices between these items?” as you move through the aisles. Let your kids pay with cash and count the change. Don’t forget to reward yourselves a little if you meet the goal – preferably, with the spare change.

4. Teach patience

It's very natural for money to burn a hole in the pockets of the youngest kids. But it's important for them to learn the benefits of delayed gratification. If there is a toy, game, or goal they have set their eyes on, remind them that if they hold off spending on smaller pleasures like a sweet treat or a cute pen, they’ll be able to afford it sooner. You could even suggest that they set a bigger goal, which might take longer to achieve, but will be much more satisfying and potentially last a lot longer too. Help them to do the math.

5. Make them feel good about earning money

You expect your kids to clean their room, help with the dishes and do other daily chores, which is great for teaching them responsibility. To teach them the reward of hard work, you could offer them the chance to earn some money (on top of their allowance) by helping you with bigger chores, such as organising the pantry, washing the car, or mowing the lawn. Getting paid for extra work will help instill good habits and give your kids more control over their saving and spending. Nothing beats real-life lessons.

6. Show them that sharing is caring

No one is ever too young to learn about helping others. Talk to your kids about the benefits of sharing what they have with the less fortunate. Take the time to walk them through the many charities they could help, not just with money, but with their time and resources. And if they are comfortable with the idea, they could donate a portion of their pocket money or the extra money they earn from doing the bigger chores to a charity of their choice. A lesson on gratefulness is a priceless one. It also teaches them that some rewards cannot be measured with money.

7. Create learning opportunities

If your kids spend their entire allowance in a heartbeat, say no to their requests for more money before their next allowance is due. Be firm in your decision and stick to it. Negative consequences can carry powerful lessons. The sooner they learn this, the sooner they can move on to other lessons. Have conversations with them about how to do better the next time around – hopefully, they will start making wiser choices. This will also teach them about actions and consequences, and responsibility.

8. Set up their savings

As a parent, one of the most important things you could do for your kids in terms of money is to help set up their accounts. You could teach them the Save, Spend, Give/Share model. With younger kids, it means having three clearly labeled, see-through jars. Clear labels serve as a reminder of what they’re saving for. Transparent containers allow them to see their progress and feel more motivated. With older kids, this can be done with having different bank accounts which they can also label for bigger goals, such as Everyday savings, New phone, First car, Gap year, etc.

Make sure to teach all kids to save for a goal, no matter how big or small. You could incentivise them by matching their savings but remember to explain why you do it and how you are able to.

9. Explain why money isn't everything

It is essential to teach kids that although money is important, it is not everything and it definitely doesn’t define one’s success or happiness in life. Money is an enabler to some of life’s experiences - it is a tool, a powerful and important one, nonetheless. And just like a pair of scissors, it can be used to create a work of art or destroy it – it is how they use it that counts. This lesson is also especially important because we want our kids to be able to create and manage wealth not just for themselves but to help others too. You want your kids to be money-savvy, not money-crazy.

10. Walk the talk

To be able to teach our kids, we first need to equip ourselves with knowledge and experience. Keep an open mind and read as many articles and books about finance as possible, follow the news and latest developments, watch programs, listen to podcasts, attend seminars and workshops, etc. There are infinite free educational resources online for all ages and levels to choose from. Look to family and friends who are good at managing their money - get their advice, study their successes, and learn from their failures.

Put your learnings into practice so that you are not simply preaching to your kids but leading by example. Model budgeting and smart money habits. Be open about your financial and retirement goals and let them learn by seeing how you handle money. Most importantly, keep evolving.

Weaving these practices into your daily routine will help your kids form good money habits. The younger you start them on their journey, the more effortless it will seem for them as they grow up.