The 5 Money Lessons Every Parent Teaches Their Child

Money regrets — we all have some. We’ve all made financial decisions we would ‘undo’ given half a chance. It might be the under-performing property we wished we’d passed on or that great property we wish we had really chased.
Given how important financial skills are to navigating life, and the fact that schools don’t teach children about money, there were a few important financial lessons we were taught by our parents when we grew up and should pass on to our children:
1. You May Have to Wait to Buy Something You Want
This is a hard concept for people of all ages to learn, however the ability to delay gratification can also predict how successful one will be as a grown-up. Children need to learn that if they really want something, they should wait and save to buy it.
The problem is we all want the best for our children, which is why a common trap for parents is giving their kids everything they feel they missed out on growing up.
The lesson you want to demonstrate is not one of instant gratification, but one that shows how much reward comes from putting in incremental amounts of effort.
If your child patiently saves Rs. 50 per week for a few months to buy a toy worth Rs. 500, how much do think they’re going to love their new prize? And more importantly, when lessons like this are learnt young, it will encourage them to manage their money more smartly as they get older.
2. How to Decide Between Needs and Wants
This is an essential lesson, and the earlier your child learns this, the better. Understanding the true difference between what they really want and need will help them make better decisions with money. It will also teach them about delayed gratification, buying based purely on emotion and curbing their impulses.
When your children ask you for something next time you’re out shopping, ask them if they really need it or just want it? Is it something they can do without, or would it be really hard to go without this item? This can be treated like a game to teach your kids financial literacy.
3. How to Share Their Money
Our attitudes about money are formed at an early age, and a lesson on how giving their money makes a difference in the lives of others and the world is a powerful one.
Create a savings jar specifically to donate to a cause they care about or save up for a gift for sibling or classmate. Another idea is to devote a savings jar for gifts. It’s also a prime opportunity to teach them how to be resourceful and get creative with finding different options.
Talk to them if they would rather volunteer or make a gift instead of spending money to buy one. This will show them that there’s a clear trade-off between their time and money.
4. How to borrow responsibly
While this is a somewhat complex topic, teaching your children the ins and outs of borrowing money and how to do it responsibly is something that will serve them well throughout their lives.
You can offer to give them a loan for a bike or computer if they save up for half on their own. Sit down with them and do some research on how much something costs, and if they can get it on sale. Your kids should fully understand the discomfort of the loan payments, interest, and opportunity cost that comes with debt.
5. Every purchase has an opportunity cost
Children also need to know money is finite, even for wealthy families. That means money used to purchase one item won’t be available to purchase other items. Make them aware of trade-offs as soon as possible.
An easy way to teach this lesson is to involve children in making everyday choices. The grocery store is a natural place for these lessons. Kids can be asked to decide between two items, such as two variety of cookies, with the explanation that money for both is not in the budget.
