I will always remember a specific moment from my childhood. My uncle was driving me to his and my aunt’s house, and as we got back into the car after stopping for lunch we saw someone in the restaurant parking lot light up a cigarette. My uncle paused before starting the car, and took a moment to look at me. “Smoking is a very bad habit for you. It’s not good for your health. You know that, right?” he said. The way he conveyed this message was so intentional that I felt honored that he had taken the time to speak it to me. Children learn by example, but we can not dismiss the importance of the lessons that we speak aloud. Taking the time out of your busy schedule, even if just for a moment, can mean so much to a child. When it comes to finances, you can change a child’s life by taking the time to teach them these three important money lessons.
1. Money Is A Tool
Money is a resource that can help us do the things we want to do. Tools are neutral; they are neither good, nor bad. A hammer can be used to build a house, or to tear down a house. In the same way, money can be a tool used to build a life of love and laugher, or it can be used to produce stress and discomfort. Training a child to see money in a neutral light can help him or her move forward with a postitive relationship to finances.
2. Compounding Interest Adds Up Quickly
Once a child is old enough to appreciate the value of a dollar, it is important to show them examples of compounding interest. If a child grows up thinking that money always multiplies in a linear fashion, they will never understand that exponential growth is possible. A great way to teach this lesson to your child is to help them invest a small amount of money. They will see it grow as the interest in turn collects more interest. Also, be sure to run through some investment simulations that show the impact of compounding interest over a span of several decades. This will help your child start to invest at a young age, which can have a significant impact on retirement funds.
3. Money Is Like Manure: It Helps Things Grow
When a child understands that money is a tool, they can also understand the importance of giving. Teach your child that money is not to be hoarded and stressed over, but rather shared with others in need. A concept such as tithing can be a great example of this. Helping your child donate some of their earnings at a young age can introduce them to the powerful and joyful feeling of giving the gift of money.
Your child is learning from you by watching the way you spend and interact with your money. Your facial expressions, off-the-cuff comments, and tone of voice regarding money will make a big impact on them. Make an even stronger impression by taking time out to speak your message to your child. This will most definitely be noted in their minds as a significant and memorable event, as it was for me.
If you want to share these positive messages with your child, but feel like your own finances are not in the shape that you would like for them to be before teaching someone else, you can start to improve your own situation. Reach out to experts such as those at Nationwide Debt Reduction Services, and pick up books that will help you understand your finances. A great resource for learning about compounding interest is Tony Robbin’s book, “Money: Master the Game.” Helping yourself grow and learn will in turn help your child, as you become better able to transfer valuable money lessons.
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