Teaching children about money
I have two daughters aged ten and seven. My ten-year-old daughter is becoming interested in the world of money—spending her pocket money and formulating plans on what she will be when she grows up.
Through one of my financial-social-media connections, a book was recommended on the topic of money and children. It had some excellent reviews from financial planners, so I purchased it. It took a while to arrive, and by then, I had completely forgotten about it. It was left on the kitchen table when it was delivered, and my daughter picked it up, started reading, and finished in a few days. She voluntarily came and talked to me about the subject of money. She said she enjoyed the book and wanted to know how to invest, explaining to me the three rules: 1. Save 10% of your income 2. Invest 3. Be patient when investing. She did this without any prompting from me, and rather surprised, I thought I’d better read the book!
The book in question is Grandpa's Fortune Fables featuring a 13-year-old girl named Gail sharing her Grandpa's adventures on a faraway island, where he learned how to look after his money and became a very wealthy man. She is putting what she learned from him into action and now has more money than most kids her age. It was an excellent read, and I can see why kids pick up money lessons from the stories.
Did you know that kids form most of their financial habits by the age of 7? This is why teaching your children about money from an early age is one of the most important things to consider. However, it can be a very difficult task, especially if you were never taught it yourself! There are many different ways to explain how the money system works to your children. No one way is right; you just want to find a way that is engaging for your child. There are many websites and guides to do this.
Opening up and starting conversations about handling money and finances with your kids may seem overwhelming, but it doesn't have to be. As a parent, it is your role to serve as a positive influence in their lives and get them on the right financial track.
As a parent, you want the best for your children. This doesn't necessarily mean you want them to have the best clothes, the latest toys, or the coolest gadgets. Most likely, it means you want them to be safe and secure. And you want to lay a foundation they can build upon to do well in life.
The Chinese proverb "rags to rags in three generations" encapsulates the concept that family wealth does not last for three generations. The first generation makes the money, the second spends it, and the third sees none of the wealth. And Warren Buffet says a wealthy person should leave his kids enough to do anything but not enough to do nothing. As financial planners, we can help put protections into place, such as a family trust, but sound financial literacy is far more important.
Money habits are often passed down through generations. Money is central to transacting life. There are bad habits and good habits that can have a huge impact later on in life. As financial planners, we ask our clients what their experiences with money were at an early age, it sometimes indicates behavioural traits that may come up in the investment journey.
Children will learn lessons about money one way or another. The gift of financial literacy from an early age will help play a key role in shaping your children's feelings, thinking, and values about money. I hope the book my daughter read helps her understand the valuable lessons.
Grandpa's Fortune Fables is available on Amazon