We all try to teach our kids the best of values, strive to provide them the best education possible but when it comes to money, we all wait till they reach at least teenage to talk to them about it. Even the master of finance, Warren Buffett, seems to agree. According to him one should start talking about managing money with kids when they are in preschool. Let us discuss a few ideas about how to teach your kids about money.
Earlier the better
Considering 80% of our brain growth happens by age 3, it makes perfect sense to start early. Of course, I am not talking about explaining them futures and options but start with basic concepts of managing money.
Infact, in 2011, Buffett helped launch a children’s animated series called, Secret Millionaire’s Club. There are 26 episodes and each talks about a financial lesson e.g. why you should track where you put your money.
Following are top three lessons from the show. Let us go through them and learn how to teach your kids about money.
1. Think from multiple angles
The goal is to make sure that your kids don’t give up just because something is hard and they don’t succeed in the first attempt.
- This is for kids >5 year old. First show your kids a lot of different types and styles of paintings. Discuss each style with them, what they see as the differences in strokes, colors, style etc. Then, ask them to paint something and have them think and use different tools apart from the paintbrush, like fingers, sponge, vegetables, spray etc.
- This is for kids >7 year old. Challenge your kids to come up with uses for discarded things around the house. For example, use bottle caps as chess pieces, make pen holder from ice-cream sticks etc. This would help them with critical thinking as well as be aware of saving the environment.
2. How to save money
The key idea here is to make sure your kids understand the difference between wants and needs.
- This one is for kids around >5 year old. Keep two jars or piggy banks. One labelled as “For saving” and the other labelled as “For spending”. Whenever, they receive money (as gift or allowance), ask them how much of it they want to save and how much do they want to spend. You can make it interesting by giving them an interest on what they save. Tell them that if they save Rs. 100 on their birthday, then on their next birthday they get Rs. 105 or whatever percent interest you think is the market return.
- This one is for kids who are >5 year old. Ask your kids to keep a scrap-book with photos or list of things they would like to purchase. Once the list is big enough, go over each item with them and mark if it is a want or a need (e.g. a new toy is a want, but a backpack is a need).
3. Explaining worth or value of something
I am sure each one of us, including me, has been guilty of paying more for things than it was worth. We could have easily gotten an unbranded but similar quality item for a lesser price but we chose not to, because, branding has played an important factor in our lives. The idea here is to make kids aware how advertisements play with out minds and have an idea about the actual worth of a product or service.
- This is for slightly older kids who are >8 year old. Pick up a magazine and choose an ad. Ask your kids what is being sold? What message is the ad trying to get across? What caught their attention? Will they buy the product just because they saw this ad?
It is never too early to start teaching your kids the value of money. In fact, the earlier you teach, the more they will learn about financial matters which I believe is one of the most important yet least taught skill.