#3 How to Teach Your Kids About Money – The Right Way

You are listening to Wealthbytes, the best show on the planet for tech professionals who wants to take tax-smart decisions, make money and retire early with clarity and confidence. You are about to get the real deal from building your emergency funds to investing like a pro. I am the founder of MyWealthChoice, with 20 years of experience helping tech professionals take tax-smart decisions. Now, here is today's episode. Welcome to the new episode of Wealthbytes. Today, I will be discussing an unconventional topic for a financial planner. I want to talk about how to teach our kids about money. First, let me start by asking you, did you know that kids as young as 5 already have emotional reactions to spending and savings? And did you also notice that all our education systems are based on money? Do you know that all our education systems lack financial literacy programs? It means that our future generations have no idea what a payslip is or what taxes are for. That means the way you talk about money, and more importantly, the way you handle it, can shape your child's financial future. But here is the problem. Most parents either avoid talking about money or turn it into a boring lecture. Today, I will talk to you about how to teach kids about money, the right way, through everyday moment, fun activities, and real-life experience. The first way you can do that is by making it real. Teaching your kids about money through everyday life. Forget the formal lessons and lectures. Kids learn best by watching and doing. So instead of just talking about money, involve them in real-life situation. And you can do this when you go grocery shopping. Show them how you compare prices and why you're going to choose one brand over another. You do this every day, don't you? While you're doing that, explain the trade-offs that you've done. Whatever you're thinking about in your head, say it out loud. This cereal is cheaper, but this other one lasts longer. So which one is the better deal? Speak that out loud with your child. Let them help you with the budgeting by giving them a small amount to buy a snack. Guiding them through choices. This will help them to make trade-offs when they are by themselves. The second thing you can do while making it real can be done while paying the bills. So when you're paying your electricity, water, internet bills, explain what you're doing in simple terms. Explain that these are the bills that we're using for the use of our services. If you're savvy and you make these online comparisons to save on your bills, talk to them about it. They don't really have to understand how it works. Just explain it in simple terms. Explain to them that people are hungry for your business. That's why they give you better prices and you want to take advantage of this. Talk to them about saving $50 of electricity bill this month means we're going to buy more desserts over the next weekend. Another way to make it real as well is to plan the vacation. So planning a vacation with your children is very exciting. Do you know that your kids will be more excited when they're planning for the trip more than having the trip itself? Show them how much the trips cost and let them help budget for food, activities, and transportation. Give them also a set amount for souvenirs so they learn to make priorities on their spendings. This type of everyday money moments make financial lessons relatable and practical instead of being just abstract, concepts. The second way to do that is to start early and keep it simple. Money lessons should grow with your child's age and understanding. Here is what you can teach at each stage. Between the ages of 5 and 7, you can discuss with them the basics of savings and spending. Introduce them to the piggy bank or save-spend-give jar system. Make savings exciting for them. Match their savings as a bonus to encourage good habits. Last year, I started this with my daughter. Every Sunday, she has to do something extra to get her weekly allowance. It's very simple, something like reading a chapter in a small book or helping her young brother learn something new. Once she did that, I give her her allowance and then we discuss how much is she going to spend, how much is she going to save, and how much is she giving for charity. Then we have a small conversation about why she thinks she's going to spend more than she should. My daughter thinks this is the right allocation. It is entirely up to her and by time, she started to understand the implications of saving, spending, and giving to charity. When she builds up a sufficient balance for charity, we go on the internet and find different local charities with different causes and I will let her decide which charity she would like to donate to. You can start this with your children too. Try it with your children. It improves bonding and kids find it fun. Between ages 8 and 10, budgeting and delayed gratification is appropriate. You can give them a weekly allowance and let them decide how to spend it. Teach them to wait before making big purchases. Try the strategy of "let's see if you still want this toy in a week." By time, they will learn about delayed gratification. In this world we're living in, where instant gratification is part of our daily routine, this will help them to build patience as well. By the ages of 11 to 13, investing and compounding interest is a very interesting subject to discuss. Explain to them how money grows over time with real examples. You can say, "If you save $10 every month in a year, you will have $120 by the end of the year. But with investing, it could be much more." And you can give them an example too. You can also introduce simple investment concepts using apps or stock market games. When you start early, you will have a lot of money. It will set the foundation for them for a lifetime of good financial habits. The third strategy that you can use with your kids is to use visuals because kids just love them. Kids absorb information better when they can see it. Try these visual tools. Create a family money board. Track savings goals together like a family vacation or a new game console. Review it weekly or monthly so that they can see the progress and stay motivated. You can also use jars for saving, spending, and giving. You can put a label on the three clear jars: one for saving, one for spending, and one for giving. Let the kids physically put money into each jar so they see where it's going. You can also make progress charts. If they're saving for something big, create a fun chart where they color in the sections as they save more money. This makes saving exciting and rewarding. Visual tools turn money lessons into tasks. They're tangible and fun experiences that kids actually remember forever. The fourth strategy is to gamify it. Turn money lessons into playtime. Kids love games. So why not make learning about money fun? You can start with playing Monopoly. It teaches them about property investment, trade-offs, and money management. You can also help them mock the stock market challenge. Pick a few stocks and track their growth or loss together. You can do this. On a weekly basis or monthly basis. You can also try allowance challenges. Give them a set amount of money for the week and see if they can stick to the budget. Have a conversation on how they tracked on this budget. When money lessons feel like a game, kids stay engaged and excited to learn. Number five, be honest about mistakes and teach through them. Many parents avoid talking about their own financial mistakes, but being honest helps kids learn. Learn valuable lessons. Share times when you overspent or invested poorly or didn't even budget correctly. Explain what did you learn from this experience and how did you handle it. This will build trust and shows them that making mistakes is okay as long as they learn from them. Money isn't about being perfect. It's about making smart decisions over time that accumulates to your success. Number six. Let them control. Let them make financial decisions. Kids learn best when they have real-world experience with money. Give them opportunities to make decisions. You can provide an allowance and let them manage their own small budget. Let them also make small purchases. If they want a toy, let them decide if it's worth spending their own money on. Take them to the shop. Let them decide. Let them see the price tag and then they will make a decision. Online purchases will ruin this experience. I know it is time-consuming, but it's very important for bonding. Encourage them also to earn money. Lemonade stands or even small jobs help them understand the effort-money connection. They need to understand that money is not something that we can get just out of the ATM with a plastic card. Experiencing these financial decisions first-hand will help your kids develop critical thinking and responsibility. And I think this is one of the most important skills you need. you need to build for your kids moving forward. Number seven. Model good financial behaviors because kids will copy you no matter how long you talk to them about a good habit or to avoid a bad habit. If you're doing this good habit, they will simply copy you without thinking. And if you're having a bad habit, they will definitely copy you also without thinking. They don't listen to what you say. They watch what you do. So if you budget and save, they will see money management as normal. If you avoid impulse purchasing and you talk loudly about it, they will learn self-control. If you talk about money openly, they will feel comfortable asking questions to learn more about money. This will help them to build a healthy relationship with money. Your financial habits will set the foundation for theirs. So you need to lead by example. Finally, I would like to say that teaching kids about money doesn't have to be complicated. Start early, keep it real, and make it fun. Also, I want you to reflect, on your childhood and how your parents' experience with money shaped your character. You will find that a lot of the money habits that you picked were originally money habits that your parents went through, whether good or bad. If you found this helpful, please let me know. Connect with me on LinkedIn or email me on moe at mywealthchoice.com.au. I hope you have enjoyed this episode and I hope you can pick one or two things from them and implement with your kids. It will definitely shape their future and will definitely help bridge the gap we have in our education system. You will be surprised how many people I see who graduates from university with amazing degrees, but still struggle with money. Don't let your kids struggle the way they are. Thank you for listening. Thank you so much for listening and giving me your time to know what I want to talk about. Speak soon. Thank you.