5 things to teach your kids about money and happiness

What are the most important lessons you can teach your kids about money? This is a difficult question, because there are so many lessons that children learn from their parents, grandparents or guardians. One thing is very true, however: how we act later in life can often be directly correlated to what we learned earlier in our youth.

Children are taught lessons about good and evil. They can develop a hard work ethic at an early age. They may even excel in mathematics. Too often, however, adults can get in trouble because they haven’t developed a sense of what to do in financial matters.

Here are a handful of things that I believe are important to teach the young people you love.

1. Value for Money

We’ve probably all heard the phrase “money doesn’t grow on trees” over and over when we were growing up. But what does that mean for the child who looks outside and sees that money doesn’t grow on trees? Children need to learn so much more, like:

  • Where does the money come from?
  • What does this represent?
  • How did you get it?
  • What can he buy?

Having a conversation with a daughter, son or grandchild. Play the game “How much do you think it costs?” at the grocery store. Explain why one item may be more expensive than others.

Help them understand the basics of supply and demand. For example, the more people want something (i.e. high demand), the more stores can charge for it. Or if an item is hard to find (ie, scarcity), the store may also charge more. Also give reverse examples.

Even a lesson on bread for the day can help children understand the value of bread (and money). Ask, “Do you want bread that’s just come out of the oven or bread that’s been in the store for a week?” Then ask, “How much more would you pay for the new bread?”

For slightly older kids, take them to a dollar store and explain why it’s now the $1.25 store. Help them understand the concept of inflation and that a dollar today won’t be worth as much as a dollar when they all grow up. This will lead to a topic on investing. (We’ll save those tips for another article.)

2. Living on a budget

As a financial planner, one of the saddest things I see is when even rich people can’t live within their means. Overspending often leads to stress and anxiety. It can ruin credit scores, lead to high interest rates on money owed, and even lead to bankruptcy.

What could be even worse, overspending can spell the end of relationships for couples. The main causes of divorce in the United States are usually incompatibility, infidelity and money problems. With the divorce rate so high, many married couples should have a marriage counselor to resolve issues before they become too big to overcome. They should also have a financial planner to help with money issues that couples face and struggle with on a regular basis.

So before kids get into trouble later in life, take the time to talk to them about their expenses when they’re in elementary school. For example, take them to a penny candy store and give them a dollar and say, “You can only buy candy for a dollar.” When they get older, take them to the grocery store and give them $100 to buy groceries, but again, they can’t outgrow what they have. Later, in adolescence, help them understand what a budget is and how to stick to it.

Before moving completely on their own, let the kids know what happens when you spend too much on credit cards. Show them how debt accumulates and compound interest. Explain what a credit score is and how these scores can affect them later in life when they want to buy a car or a house.

3. Spending doesn’t always bring happiness

Ask a child, “Does eating chocolate cake make you happy?” The answer is probably “yes”. (If not, choose another dessert.) Next, let them know that the happiness of eating this thing doesn’t last forever. It’s the concept of “fleeting happiness” that you want them to grasp.

Then ask them, “To stay happy, do you need to eat cake every time the initial happiness fades?” I hope they are old enough to understand that eating cake 24/7 is a bad thing because it could make someone very unhealthy. If they understand that being obese can create many health problems and that good health is important for happiness, they might begin to understand what real happiness is (or at least happiness in the short or long term). term).

Now take that lesson and apply it to shopping. Explain that there is a short-term happiness that people feel when they buy the things they want. Most of the time, this happiness fades. Help them understand, just as eating too much cake can lead to bad things, buying too many products (and services) can also lead to unhappiness.

4. Lessons on saving (at the store and at the bank)

Before sixth grade, help a child understand the concept of brand names. Although yes, the quality can be better with some companies, sometimes the items are the same, but the brand costs more. Give an example of a t-shirt: a t-shirt without a logo might cost $10, but the same t-shirt with a logo might cost $25. Help children understand that they are paying extra and let them decide if it is worth it. Without confusing them, it also helps them know that buying the cheapest item isn’t always the best decision, especially if it’s an inferior product or service.

As children grow into teenagers, help them understand that some happiness comes from knowing that there is enough money to buy the things they need. It doesn’t always mean you have enough to buy the things you want. There is a big difference between the words “need” and “want”. If they can understand the “buy what you need, but don’t always buy what you want” lesson, they’ll likely save more. Help them understand that happiness then comes from having savings, as this leads to “peace of mind”.

As the children are about to move on their own, let them know that they are now making decisions that will impact them when they are older. If they don’t save for retirement, they’re probably missing out on the happiness they deserve later in life.

5. Discuss the gift – and demonstrate it

Spending money doesn’t always have to be self-centered. For example, donating to support a charity can bring happiness, even if that money is going to help other people.

At an early age, this concept is difficult to grasp. When you talk about giving, you might get a response: “It’s my money. I don’t want to give it away. This is a completely normal reaction.

So how can a lesson in giving be taught? A dollar donated in a Salvation Army bucket during the holidays may result in a smile, a “thank you,” and an extra ringing of the bell, but this lesson needs more. A child truly understands this when he sees the person receiving the gift. For example, donate to a soup kitchen, but also volunteer so the child can see that the money is used to feed those who are struggling to eat. They might see another child their age and likely feel a “warm and fuzzy” feeling helping someone in need.

I could go on and on with lessons for children, but I’ll stop at five. I hope these examples will remind you of how much you can positively influence your children now, so that they will be happier later in life.

Do you have any other great tips for kids to learn about money? Please email me at [email protected] I would like to read them.

Securities and advisory services offered by Cadaret, Grant & Co., a registered investment adviser and member FINRA/SIPC. HMS Financial Group and Cadaret, Grant & Co. are separate entities.

President, HMS Financial Group

Barbara Shapiro is the president of HMS Financial Group located in Dedham, Mass. She is CFP®, Certified Divorce Financial Analyst and Financial Transitionist®. She is also co-author of “He Said: She Said: A Practical Guide to Finances and Money During Divorce”. Her firm specializes in comprehensive financial planning with a sub-specialty in divorce that helps clients transition from marriage to independence with peace of mind and confidence. Learn more about HMS-Financial.com.

Securities and advisory services offered by Cadaret, Grant & Co., Inc., a registered investment adviser and member FINRA/SIPC. HMS Financial Group and Cadaret, Grant & Co., Inc. are separate entities.

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