Did you know that your money mindset starts to form long before you start earning money. It begins with how money is discusses, or not discussed, in your household as a child.
Can you think of the earliest memory you have of money? Was it a pleasant memory? Or maybe it was traumatic. But believe it or not, those memories shape the way you spend, save and view money today.
Talking to your kids about money is an essential part about financial education. And it's not just for parents with lots of money. There are great lessons to be learned from teaching kids that they have to work and save up for the things that they want.
5 Helpful Tips to Start Effective Conversation About Money with Your Kids
Start the discussions early. It's never too early to start talking to kids about money. If they are showing signs of interest or have become good counters, start to explain what money is and how it is used.
Be open and honest. So many of us have grown up with the idea that money is a taboo subject and that it shouldn't be discussed. Don't continue that cycle. Be open and honest about your current financial situation. They don't need to know all of the tea but let them know if something can't be purchased right away or if you are budgeting for a large expense.
Use kids age appropriate examples. Use examples that they can relate to during your money conversations. I wouldn't start off with trying to explain how taxes work or anything but feel free to discuss the cost of the toys or clothes that they want and how long it will take to save for those expenses.
Have fun. If your kids are like mine, they like to role play. Consider playing "store" with them. This can encourage entrepreneurship as well as help explain how monetary transactions occur.
Lead by example. The old saying "do as I say and not as I do" never proved to be beneficial because at the end of the day, our kids will ultimately default to do what they saw us do. So, if you want to encourage the habit of saving, let it be seen that you are a saver.
Talking to kids about money isn't a one time thing. It will require ongoing conversations that should shift based on age and maturity. With the ongoing communication, you'll be shaping your child's mindset. We want to foster an abundance mindset and prevent a scarcity mindset.
What is Scarcity Mindset
Scarcity mindset is the belief that there is not enough which can turn into having a fear of not having enough. If you have a scarcity mindset then you may focus on what you don't have versus what you do have. You may also find yourself prioritizing short term gains over long term planning.
When speaking to kids about money, we may be fostering a scarcity mindset if our words are giving the perception that resources are scarce. For instance, saying "we don't have money for that" creates a sense of scarcity. Saying "we can save up for this" can help create an abundance mindset buy setting an expectation that it is achievable.
To contrast scarcity mindset, an abundance mindset is when you believe that there are enough resources for everyone and your focus will be on opportunities and not limitations.
Someone with an abundance mindset is likely to take calculated risks and will be more willing to collaborate with others to achieve their goal.
It's important to note that a scarcity mindset vs an abundance mindset does not solely rely on how much money you have. It's about how you view what you have.