Money is the taboo topic at the kitchen table…at least here in the USA. Most of us had a very poor education on money when we were kids. We either learned bad habits from our parents or were encouraged to accept the worker bee status we had been born into.
Educating your children about money will likely be your best investment after educating yourself on the topic. Good habits will be taught by example — even at a very early age — and nearly all of our exchanges with vendors, businesses and even the government are teachable moments. According to a report by researchers at the University of Cambridge, money habits are formed by age 7!
Here are the Top 3 Money Habits you can Teach Your Children:
#3) Save – Teaching children to save will help them learn how to be patient. Avoid, at all costs, instant gratification; this mindset will ultimately lead to debt and a lifetime of payments. Children who save for a toy and learn how to just watch their stack of coins accumulate in a piggy bank or savings account will learn the habit of not touching it.
#2) Entrepreneurship – The single best thing you can teach your child and open up their mind to in the world of finance. Exercise their ideas by always asking them about businesses they interact with. I even like to compliment businesses by talking to my kids about how great a specific service was.
If your child enjoys doing something, encourage them to think about how this skill would be useful in a business. Understanding entrepreneurship is the habit of seeing opportunity and abundance. The joy of helping your children start a business will also be a life-long memory, even if it’s just a lemonade stand.
#1) Invest – The best way to do this is to make sure your child participates in every investment you do. Stocks, real estate and even opening up a business checking account; I don’t care if they are 3 years old, bring them along. Explain to them what you are doing.
For stocks, once they are a bit older you can help them buy some of their own publicly traded companies. For those that are between ages 5 and 11 or so, you can make it a point to buy a few businesses that you interact with on a daily basis. A good example would be to buy Costco or another family favorite; this is the key to really teaching your children about fractional reserve ownership. Investing is the habit of multiplying what you already have.
The Idea of Money for Children is the Same for Adults
Produce more than you consume and spend less than you earn. I know it sounds simple, but it is a way of life that is not common in our society. These principles and life lessons are best taught by us: the parents, uncles, aunts and grandparents.