Here at L+L, we pride ourselves on filling our unit studies not only with activities that support your child in academic subjects, but also those that help them to develop and strengthen valuable life skills. In our Level 2+ Finance and Entrepreneur Units, we share many activities and books around the topic of money and fiscal responsibility. If this is an important skill for your family, we’ve also tapped financial education expert Laurel Makowem of Mothers Teaching Money to share her wealth of knowledge (no pun intended!) on how to teach kids money and build financial confidence in your young child or teen. Enjoy!
If confidence is defined as “a feeling or consciousness of one’s powers or of reliance on one’s circumstances, then financial confidence could be defined as a feeling or consciousness of one’s power and ability to earn well, build wealth, and ultimately have financial freedom.
There is a growing body of evidence showing a strong relationship between financial well-being and financial confidence, yet many children do not have the opportunity to learn the mindsets and skills necessary to build it, often because parents weren’t taught it themselves.
Here are 10 tips to help you teach kids money and raise your child to be a financially confident adult.
Give your child the opportunity to write an abundant wealth building money story.
A money story is a person’s relationship with money. It is what they subconsciously believe, think, and feel about money, which drives what they do with money, which forms their financial reality. Children learn their money story from their environment, significant adults, and the media. Fort example, they may hear things like, “we can’t afford that,” or “money doesn’t grow on trees,” or “do you think I’m made of money?” or “investing is for rich people” or “investing isn’t for us.” They may experience bickering, fighting, lies, or anxiety around money. These types of words and experiences can lead to a relationship with money based on scarcity, lack, and fear, rather than abundance and wealth building. As parents, we need to choose our words about money carefully and become aware of our own money story―and decide to change it if we must.
If money is a taboo subject in your home, decide to change that and talk about it as often as you can.
The more you talk about money with your friends, family, and children, the more comfortable you (and they) will feel around money overall. Some questions to initiate conversations with children could be:
- If $100 blew in the window right now, what would you do with it?
- I feel like ice-cream, do you think ice-cream is a need or a want?
- I wonder how much that influencer gets paid to say they love that product, or if they really do love it?
- What are you grateful for today?
- What are some things we could do as a family to save money towards our holiday?
- What would happen if all our money was suddenly sucked into a chocolate river?
- Do you think it costs money to boil the kettle, turn on the stove, or keep drinks cold in our fridge?
Use a comprehensive holistic money system, like The Millionaire Mindset Money System, to teach children how to be excellent money managers who budget and invest.
For younger children, label six clear jars with GENIUS, GOALS, GET, GUARD, GROW, and GIVE (we’ll talk more about these in a minute) and teach kids money mindsets and habits they need to make educated and informed financial choices as adults. As children grow, transition from jars to bank accounts and investing portfolios. For children of all ages, teach them how to save up to buy their wants by using sinking funds, a fund formed by periodically setting aside money for the gradual repayment of a debt or replacement of a wasting asset. Envelopes work well for younger children. or you can use bank accounts for older children.
Use powerful mental strategies like gratitude and affirmations to teach children how to think abundant, wealth-building thoughts.
Everything we do with money starts with a thought about money―and this ultimately forms our financial reality. For younger children, encourage them to write down affirmations and things they are grateful for on small pieces of paper, decorate them, and keep them safe in their GENIUS jar. Refer to their jar during challenging times, and keep adding new notes to the jar over time.
For older children, encourage them to keep a gratitude jar or journal and create a ‘my wealthy, healthy life’ vision board. Some affirmations could be:
- I am abundant.
- I am good with money.
- I can do hard things.
- I am a wise-owl (or mindful spender).
- I am smart with money.
- I make good choices with my money.
- I live in an abundant world.
Use the WOOP goal setting technique.
WOOP is an acronym that stands for Wish, Outcome, Obstacle, and Plan. It is an evidence-based intervention that helps teach children how to set financial goals (short-, medium-, and long-term) and plan for obstacles, both external and internal, that could get in their way of achieving their goals in a timely manner. Some external obstacles could be advertising, mismanagement of credit cards, social media pressure, peer pressure, and lifestyle creep. Some internal obstacles could be a scarcity mindset and lack of financial knowledge.
Just as important as developing a habit of setting financial goals is tracking progress towards that goal.
Because saving money can sometimes feel like an abstract process, use a visual tracker with these headings to help your child understand their progress:
- Goal amount (what is the amount of money they plan to save)
- Saving for (include a photo or a drawing of what they are saving up to buy)
- Start date (when will their goal begin)
- End date (by what date do they plan to achieve their goal).
As they save the amounts, color in their tracker and celebrate their progress.
Teach your child how to set up multiple streams of income.
This can include some active income and some passive income. Active income is the norm for most people and is income earned in exchange for the hours we work (e.g., a job). Passive income is when we do work upfront and continue to earn money from our efforts (e.g. rental from a rental property, an online course, dividends from shares, or royalties from a book).
For younger children, use a money catcher to encourage them to think of different ways they could earn active income. For older children, brainstorm different ways to earn money using questions like:
- What are your strengths?
- What do other people compliment you for?
- What are your talents?
- How can you make money from that idea?
- What skills do you have?
- What skills would you need in order to make money from that idea?
- How much time do you have to work on your idea or business?
- How much money can you earn from that?
- What is something that you would like to learn about but can’t find any good books or courses?
- Could you get a job at a place where you could learn your skill? (For example, if the child enjoys beauty and hair, they could work at a hairdresser.)
Teach them the Investing Habit.
When children learn the Investing Habit (investing half of all income earned) from a young age, it becomes their default way of being with money and planning for their futures. Many adults were not taught this wealth building habit, so it can sound extreme, but children are a blank canvas when it comes to developing their money habits and relationship with money.
Model setting (and sticking to) a budget.
Living on a budget will not happen organically. As parents, we need to how to teach kids money and how to plan into their budget, including giving and helping others, and how to balance giving with taking care of themselves financially.
Normalize investing in your family.
This can be done even if you do not invest! Discuss topics like investing and the stock market, perhaps reading articles from the financial industry together as a family. (This can be particularly effective when it relates to a brand or company your child is familiar with.) By familiarizing yourself and your child with the jargon and concepts of investing, you will help ensure that they never feel like this is a world where they don’t belong.
You can build your child’s financial confidence using these ten tips, starting today. Children have time to learn and practice the mindsets, skills, and habits they need to grow into financially confident adults who make educated and informed financial choices based on fact and knowledge, rather than emotion or somebody else’s beliefs about money.
At the Learn + Live Letter, we not only provide unit study curriculum that is flexible and fun but also support parents and grownups teaching them along the way. Learn more about our program here and why we love unit studies here. We look forward to the opportunity to learn + live with you throughout your homeschool experience! Click here to subscribe!