This was originally published on Monday, February 6, 2017, in the Pacific Daily News. Click here to subscribe to the PDN.
Question: I have made some financial mistakes that took years to overcome. I am now about a year out of debt and turned my credit score completely around for the better. My parents never talked about money and I think if I had learned about it sooner I may have been able to make more sound decisions. My question is, when should I start teaching my children about money?
Answer: As a parent, it is important and our duty to teach our children important financial lessons. Your financial history gives you the tools to become a great teacher to your children.
Now that you have learned about managing your finances, it is logical that you want to ensure your children don’t make the same mistakes. Many parents don’t talk to their children about finances.
Parents are the No. 1 influence on their children’s financial behaviors. You have the opportunity to raise your children to be savvy in spending, investing, saving and giving.
According to researchers at the University of Cambridge, kids’ money habits are formed by the age of 7. That means there are several years before the age of 7 to start introducing them to money and finance ideas. Teaching your children about money is a necessity. The method depends on their ages.
Kids at ages 3 to 5 will start to get curious about money. Although they may not truly understand the value of money, they can start to learn the name of the coins and which dollar bill is greater.
- Wait for it. This generation is surrounded by instant gratification. No longer do they have to search through encyclopedias for answers or wait for a letter in the mail. However, the ability to delay instant gratification is a skill that will keep them from depending on credit or going into debt as an adult.
Teach them that if they want something, they should save for it. If there is a small toy that they want, help them save money in a jar and when they have enough, take their money to the store and have them make the purchase.
- Three jars. Clear jars are a great way to teach kids about money because they can physically see their money grow or shrink. Label the three jars “savings,” “spending,” and “sharing.”
Every time your child receives money, have them divide the money equally among the jars. The savings jar should hardly be touched and can be used to buy a more expensive toy or just to grow. The spending jar can be taken to the store to buy smaller items that they want. The sharing jar can be used to help a friend or go to a cause in which they are interested.
- Play time. Kids have great imaginations. Set up a store or a restaurant in the living room. They will learn the basic idea of spending and commerce by using play money and exchanging it for goods. There are many board games from which play money can be used,
- Coupons. Go through the newspaper or magazines and have them clip coupons with safety scissors. At the store, hand your child a few of the coupons and have them search for the item at the store. This will make them feel like they are helping the family save money.
- Set the example. Kids are sponges and they learn from your habits and behaviors. If they see you using credit cards or constantly arguing about money with your spouse, they will mimic these ideas and actions. Remember they are watching you and you should set a healthy example for them.
Michael Camacho is president and chief executive officer of Personal Finance Center. He has more than 20 years of experience in retail banking and at financial institutions in Guam and Hawaii. If there is a topic you’d like Michael to cover, please email him at email@example.com and read past columns at the Money Matters blog at www.moneymattersguam.wordpress.com.