How to Teach Money Management to Toddlers
Most people are young adults (or regular adults) when they finally pull their finances together, learn how to budget, and develop a debt repayment and savings plan. You likely struggled with debt for years before you learned the basics of money management — but wouldn’t it have been so much easier if you learned financial literacy when you were young?
As a personal finance devotee, you likely want to impart the lessons of smart money management onto your offspring and save them the stress and struggle of debt in young adulthood. Here are a few ways to get started on financial education early in your child’s development.
A study from the University of Cambridge determined that most children develop their lifelong money habits before the age of seven years! Your kids learn from you the moment they enter the world, so it is imperative that you demonstrate good behavior, even when it comes to financial matters.
Set A Good Example
Let Them Handle Money
Money is a tool, and no one should be afraid or nervous when handling money. To ensure your kids feel confident working with money, you should give your toddler opportunities to experience cash first-hand.
Toddlers who are old enough to participate in even the most basic chores, like picking up their toys and books, making their beds, and caring for a pet, can earn small commissions that can fulfill their monthly budget. As your kid gets older, they will gain a greater number of more complex chores, and you should increase their commissions accordingly.
Set Up Chore Commissions
Talk About Financial Goals
You can start having conversations about financial goals even when your kid is incredibly young. Young kids don’t have any serious expenses; your toddler isn’t going to school and thus doesn’t need to save up for school supplies, clothes, or the latest kid craze.
Demonstrate Opportunity Cost
Usually, the hardest financial matter for children (and adults, for that matter) to understand is the concept of opportunity cost. In the vaguest terms, an opportunity cost is the loss of potential, a consequence of making a decision.
Wrapping It Up
Financial literacy should start young, which means you might already need to implement some of the above tricks and tips in your parenting strategy. With the right support and education, your kid can grow up with strong money management skills, putting them on the path to success.
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