How to Instill the Right Financial Mindset in Your Kids

Financial literacy is a powerful skill that can empower anyone to achieve financial freedom. Teaching kids the value of money, how to save money, and other financial principles are basic life skills that need to be cultivated early. This helps them develop the right financial mindset in navigating the complex financial landscape from youth to adulthood. 

In this article, we’ll discuss the most important money lessons for kids and how you can build their financial literacy skills.

Key Money Lessons for Kids

Introducing financial concepts to your kids at an early age helps build a strong foundation for building good money habits. 

Here are important lessons you can start teaching your kids: 

The Value of Money

Kids often do not understand the value of money – that it is earned and thus should not be squandered. 

Filipinos love saying, “Hindi napupulot ang pera,” but simply saying that will not drive the point. Instead of giving your kids money, show them that money is earned through work or an exchange of products. 

Wants and Needs

A very difficult concept to apply for finances, even for adults, is distinguishing between wants and needs. Explain what are considered “needs” and which ones are “wants.” Emphasize the reason we prioritize needs over wants, as well as when it is okay to splurge on wants. 

This discussion could also be a springboard for talking about being content with what you have or what you can afford.

The Importance of Saving Money

Introduce your kids to the idea of saving money as early as possible. You can show them that you, too, save money. More importantly, explain the importance of saving money and how you can save money for various reasons or goals.

For older kids, you may talk about when to start saving for retirement.

How to Budget

Budgeting is an important skill that kids will benefit from no matter how old they are. Teach them how to create a budget and allocate their funds between savings, needs, and so on. You can also help them follow their budget and track their expenses. 

Debt and Credit Cards

Young ones may not immediately encounter debt and credit cards, but it wouldn’t hurt to teach them how debt and credit cards work. This way, they’ll be aware of the pitfalls of debt when they grow older. 

How to Teach Kids About Money

The best way to instill financial literacy skills in kids is by putting these to work. Here are things you can do with your children to help them master the right financial mindset: 

Help them Earn Their Money

Reinforce the lesson that money is earned by encouraging your kids to earn money instead of giving them an allowance. You can start by compensating them for chores at home, which according to a study helps kids grow up to be successful as adults. 

When they’re older, you can encourage them to take on real jobs appropriate for their age. 

Allowing children to earn their own money not only helps them appreciate the value of money but also helps instill a sense of responsibility and a strong work ethic. 

Set a Savings Goal

Teaching kids to save money and getting them to save money are two different things. Encourage them to save money by helping them set a goal. 

You can encourage them to save up for a toy or any item they want. As they grow older, you can encourage your children to save up for a car or college. 

Let them Manage their Savings Account 

With a goal in mind, set your kid up for success by giving them a place to keep their savings. It could start with a piggy bank and progress to a savings account for kids. As they grow older, you can also encourage them to open other accounts for different saving goals. 

Having their own savings account can encourage them to be more responsible for their finances. 

Start a Budget and Track Spending

An important financial literacy skill is tracking spending and following a budget. With your kid earning their own money, you can help them create a budget and establish a process for tracking their spending. 

This will help them be more aware of how they use their money and the value of things. It will also be easier for them to save money if they have a disciplined approach to spending. 

Let Them Make Mistakes

Don’t be afraid to let your child make mistakes while they’re young. This is an important part of learning. Of course, be sure to explain the mistake to them so it becomes a teachable moment.

Include Them in Money Talks

Talking about your finances with your children may be uncomfortable, but these discussions are a great opportunity for them to see the applications of the money lessons.

Let them learn from you about budgeting, saving, and investing. You could include them in discussions about something as simple as how to choose a savings account for a new financial goal for the family or something more complex like investing. 

Get them Started on Investing

Older generations of Filipinos often save without investing, so they miss out on lots of opportunities. Learning how to save money as a kid is an important skill, but it’s just as important to teach the new generation about investments as a way to grow their money. 

Help your child understand the principles of investing and the different investment opportunities like examples of savings accounts with higher payoff. You may guide them through making an investment decision or let them do it on their own.

Either way, it’s a good lesson that could give them a head start on financial freedom. 

Set a Good Example

Following the concept of social learning theory, children learn by copying the people around them. So, if you want your children to learn a healthy financial mindset and behaviors, model this type of behavior as well. 

For example, practice budgeting and expense tracking for your household as well, avoid impulse buying, and demonstrate to your kids that you’re saving for retirement. Modeling the behavior you want to see is more effective than simply preaching.

Instilling the Right Financial Mindset Early 

Building healthy financial habits and skills at a young age is the foundation for your children’s bright future. Teaching kids to save money will help them develop skills, habits, and attitudes that will help them avoid financial stress, and more importantly, become successful adults. 

RCBC is here to support your child’s financial journey with different types of savings accounts to accommodate different goals as they grow older. Steer them in the right direction and you can assure that they’ll be in good hands.

Contact us to learn more about our savings accounts.