Children from a young age should have a healthy relationship with money, and the only way to do that as a parent is to set an example. Educating a child about money is a process and not a one-day job.
Teaching should start with making them aware of how money works. Taking them shopping and using cash to make the transaction will help them see money working in action.
This will, however, also send the message that money is meant to be spent. They will see you buying stuff for the house and even for themselves by giving money. Here is where the lessons on saving money need to be taught simultaneously.
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If a child buys and eats chocolate every day, a parent can at first deposit a similar amount in his money jar and show him how much he spends on the chocolate in a month. They can then encourage the kid to save the money instead and see it build up.
In 1960, the University of Stanford began conducting a series of experiments on children that of ages around 4-5. The experiment, now famously known as the Marshmallow Experiment, involved bringing a child into an isolated room and keeping a marshmallow in front of him. The child was then informed that the researcher would leave the room for some time, but when he returns and finds the marshmallow still on the table, the kid will be rewarded with a second marshmallow. But if the child eats the marshmallow in front of him, then there would be no reward for him. Many kids ate what was in front of them, but there were some who could resist the temptation.
Stanford University tracked these individuals over 40 years and found that those children who were willing to delay gratification were good in their studies, had better health, and did well in life.
The benefit of delayed gratification is not easily understood, but that is where parental teaching comes into play. Saving results in delayed gratification but helps build security and independence.
Children should be taught the value of money. Giving a child pocket money is good, but it would be better if they earned it by doing small chores around the house. Everyone values the money they earn as compared to what they receive. As they grow up, they understand how difficult it is to earn money, and much more difficult is how you use it.
In order to develop a healthy relationship with money, a child needs to learn how to handle it. The concept of earning, saving, and investing money is to be clearly understood to handle money with respect. Managing money is a lifelong habit, if taught well and early, it can result in lower financial stress throughout their life. Habits are difficult to break, especially ones whose rewards are
visible every day.
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