Meet David, a 33-year-old creative director at a top advertising firm in Ikoyi, Lagos. He has always been the envy of his colleagues, with his sleek suits, trendy gadgets, and luxurious lifestyle. But despite his outward success, David is secretly struggling to make ends meet. His love for fine dining, weekend getaways, designer labels, and a creeping gambling addiction has left him with a mountain of debt and a dwindling savings account. He often finds himself living paycheck to paycheck, wondering how he got here.

As he reflects on his childhood, David realizes that his financial woes stem from his upbringing. His parents, though well-intentioned, spoiled him rotten, never teaching him the value of money or the importance of saving. Now, as an adult, he’s paying the price for his lack of financial discipline. 

David’s story, although a fictional one serves as a stark reminder that financial struggles often stem from a lack of guidance during our formative years. Many of us struggle with financial responsibility because we weren’t taught healthy habits from a young age. However, it’s never too late to change. And for parents, this is a valuable wake-up call: teach your child about money, and you’ll set them up for a lifetime of smart financial decisions and a secure future.

Breaking Down the Psychology of Financial Habits

According to research, many financial habits begin to take shape by the age of seven. This is because around this age, a child’s brain begins developing rapidly, laying the groundwork for complex thought processes and decision-making skills. In fact, the ancient Greeks had an interesting concept regarding the mind of a child. This concept, which would later be coined “Tabula Rasa” by philosopher John Locke in 1689, describes the mind of a child as an empty slate, devoid of logical reasoning and preconceived notions, waiting to be shaped by experiences and learning.

Think of it like a phone’s storage space of, let’s say, 256 GB of RAM. When you check the storage settings, you’ll discover that a significant portion has been allocated to system software like messaging, phone, camera, etc. Similarly, the mind of a newborn comes pre-installed with essential “system software” like blinking, breathing, eating, reaction to pain, hunger, joy, and other instinctual responses—all default settings by nature.

Just as you can install new apps and fill the remaining storage space with your preferred content, children’s minds are constantly absorbing knowledge, habits, and values from their environment, including financial habits and attitudes. This makes early childhood a critical period for teaching healthy financial habits, as these early lessons can have a lasting impact on their financial literacy and decision-making skills.

In this article, we’ll explore five everyday activities that can help teach your child valuable lessons about money, setting them up for a lifetime of financial stability and success.

1. Talk to Them About Money

This is the foundation of today’s discussion, as it’s crucial to make it a habit to talk to your little one(s) about money. Let them understand the stakes, and the importance of financial literacy. Most times, parents often worry that being too candid about financial situations in the home might lead to more worry, especially when things aren’t at their best. Many of our parents kept this away from us. Sure, they had the best intentions, but we don’t have to repeat the same cycle.

Telling your kids about these things will help them to be better equipped to handle such issues if they arise. Educate them about budgeting and cutting back on unnecessary expenses during difficult times. Explain the importance of saving and how it can benefit them in the long run. Share your own experiences, both successes and failures, to help them understand the value of money and how to manage it wisely.

2. Involve Them in Real-World Transactions

Every parent knows what it’s like to be bombarded with constant requests for the latest toys, treats, or gadgets. The truth is, kids often have no concept of the financial constraints that come with raising a family, and their expectations can be unrealistic. They see something they want, and they expect you to buy it for them. However, involving them in grocery shopping can be a valuable learning experience that teaches them about budgeting and prioritization.

Take them with you to the store, and let them help with making purchasing decisions. Give them a budget for a specific category, like fruits or snacks, and let them decide what to buy. This will help them understand that there are trade-offs and that you can’t always get everything you want. Encourage them to compare prices, look for deals, and make smart choices. As they help with grocery shopping, explain the concept of budgeting and how it applies to your household. This hands-on experience will teach your child about money and help them develop essential skills for making informed financial decisions.

3. Make Them Earn Their Allowance

Instead of simply giving your child their allowance, consider introducing chores or tasks that they must complete to earn it. This could be anything from helping with laundry, home sanitation, feeding pets, or assisting with meal prep. The idea is to teach them that money doesn’t come easily and that it requires effort and dedication. 

This will teach your child about money and help them develop a strong work ethic. As they complete their tasks, pay them their allowance, and encourage them to save a portion of it.

This neatly brings us to our next point.

4. Introduce Them to Saving

Guide your child towards the art of saving whatever they get, whether it’s monetary gifts from family friends, or relatives. Encourage them to put it in a piggybank or a clear jar where they can see their money grow. This habit will teach your child about money and help them understand the value of setting aside a portion of what they get. And as they progress to primary school, consider opening a child savings or investment account. Doing this will help them get familiar with the banking system and understand how interest works.

However, be mindful of the temptation to use their monetary gifts for purposes other than what’s intended. While it may seem convenient to take a portion of it to tend to pressing needs, it undermines the lesson of saving and can create mistrust. It’s essential to let them own the process and make certain decisions, so please don’t fall into the all-too-familiar schtick of taking their monetary gifts and promising to use them to get Christmas clothes. Yes, we see you!

5. Host Family Finance Game Nights

Yes, we know around these parts, things like these are pretty uncommon, but trust us, it’s a game-changer! (pun intended) 

Gather your loved ones around the table for an engaging evening of board games, where learning about money management meets bonding and fun. Board games like Chess and Monopoly are more than just entertainment; they’re tools for teaching kids the value of budgeting, thriftiness, and strategic financial decisions.

As you roll the dice, make deals, and move pieces, you’ll foster a sense of togetherness and create lasting memories. This special night will become a highlight of your child’s week, making learning about money management an enjoyable, anticipated event. So, why not give it a try? Set aside a night, grab some snacks, and prepare to make financial literacy a family affair everyone looks forward to!

6. Teach Them About Investing

Guess what? For reading up to this point, we felt it would be most unfair to leave you without the best advice ever: “Teaching them about investing from a young age”—and not just investing, but smart investing. Let them understand the risks and rewards that come with it. Break down complex investment terms into understandable bites for their young learning minds.

For instance, explain the concept of compound interest using the example of a small seedling that grows into a mighty tree over time. Just as the seedling absorbs nourishment and water to grow, produce branches and leaves, and eventually spread its roots wide, compound interest works like a financial seedling that grows exponentially. As your initial investment earns interest, that interest is reinvested, generating even more interest, which then gets reinvested, and so on. This creates a rapid accumulation of wealth, much like the tree’s growth accelerates as it matures.

Additionally, introduce them to the magic of long-term investing, also comparing it to planting a tree that grows over time. Use relatable examples to illustrate diversification, such as a bowl of fruit salad with different fruits that cater to different appetites. As they grow, gradually introduce more advanced concepts, like asset allocation, stocks, and government securities.

By laying this groundwork early on, you’ll empower them to make informed choices and build a strong financial future.

Conclusion

There you have it! Five, now, six everyday activities that will help teach your kids valuable lessons about money.

In a nutshell, incorporating these simple yet effective practices into your daily routine will not only give your children a solid foundation in financial literacy, but it will also set them up for a lifetime of smart money decisions and healthy habits—a true gift that will keep on giving.

While teaching your child about money is the valuable lesson to take away from this discussion, it’s not about raising mini-investors or financial whizzes. Rather, it’s about giving them the tools and confidence to take control of their financial journey. With patience, consistency, and the right approach, you’ll be amazed at how quickly they’ll grow into financially savvy individuals, ready to take on whatever life throws their way. 

Bravewood is licensed by the Central Bank of Nigeria to provide investments with low risk and high returns for Nigerian professionals.