Who remembers receiving $20 in a birthday card from a relative? Or maybe it was $5 or $10, depending on how far back we’re talking.
And whether you’d already spent it in the time it takes to receive an extra-long hug from THAT auntie, or you’d deposited it straight into your savings account with THAT bank, or you’d invested it into your latest and greatest money-making venture – there’s a good chance that those same money habits are with you today.
If you’re thinking about gifting some cold, hard cash to the little ones in your life, then have a think about how you can help them develop a good relationship with money, because as we all know: old habits die hard.
Giving cash is probably more useful than ever in today’s increasingly cashless society, because it gives kids a more tangible insight into how money works.
Here are five ways to help children think about money:
Note: We’re not saying there’s a right or wrong way when it comes to someone’s money mindset, but we’re big believers that knowledge is power.
Money Jars for Tangible Learning
Introduce the money jar concept where kids allocate money to categories like save, spend, invest, and donate. Physical jars help them grasp abstract ideas, fostering discipline and purposeful decision-making.
Opportunity Cost – Teach Wise Choices
Highlight opportunity cost when deciding on purchases. If Little Ryan wants that $10 ride again, remind him of the show bag he might miss out on. It’s a playful way to instill the habit of considering consequences before making decisions.
Understand Good vs. Bad Debt
Educate about good debt (investment in wealth-building channels) vs. bad debt (costly debt). Consider charging nominal interest on a loan to introduce the concept of earning or paying compound interest.
Break the illusion that money grows on trees. Share insights about your earnings, the work involved, and the value of education. While not every detail needs to be discussed, this radical transparency helps kids appreciate the effort behind financial comfort.
Invest in Shares for Future Wealth
Setting up a very modest portfolio can be an incredible way to introduce children to the concept of trading shares. With user-friendly apps, the barriers to entry are lower. Make sure you speak to your accountant and/or financial adviser for guidance around the capital gains benefits.
As you embark on the journey of teaching your children about money, remember that these simple yet impactful lessons can shape their financial future. By instilling wise money habits and fostering a transparent and informed approach, you’re providing them with tools that extend far beyond the dollars and cents. Explore the possibilities and empower your children with financial literacy.