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We teach our kids how to walk, talk, and read, but one of the most critical life lessons often gets overlooked: financial literacy. Beyond learning to save a few dollars, developing a healthy money mindset is about shaping a child’s entire relationship with money, which will impact their well-being, personal perspectives, and self-care for the rest of their lives.
Your child’s money mindset is their collection of beliefs, attitudes, and behaviors toward money. This mindset, often established early in life, influences their financial decisions and overall financial success. It’s why two people with similar incomes can have vastly different financial outcomes.
Understanding the 5 Money Mindsets
Recognizing these common mindsets can help you guide your child’s thinking:
- Scarcity Mindset: A person with a scarcity mindset often feels there is “never enough” money. They may be excessively frugal, hoard money, and be reluctant to invest, even when they have a comfortable income. This can lead to a fear of spending and a lack of enjoyment of the money they have.
- Abundance Mindset: The opposite of scarcity, this mindset believes there are plenty of opportunities and resources available. People with this mindset are more likely to take calculated financial risks, invest, and seek growth opportunities.
- Money as a Measure of Self-Worth: For some, their value as a person is directly tied to their bank account balance. This can lead to a constant drive to earn more, sometimes at the expense of relationships or health.
- Fear of Money: This mindset often stems from the deep-rooted belief that money is the “root of all evil” or that wealth will change them negatively. This can lead to self-sabotage and missed financial opportunities.
- Balanced Mindset: A healthy, balanced money mindset views money as a tool to achieve goals, not as a definition of self-worth. People with this mindset are able to save and spend wisely without letting money control their lives.
4 Ways to Grow a Healthy Money Mindset
A healthy money mindset can lead to better financial decisions, a sense of abundance, and greater financial success. Here are four ways to help your child cultivate one:
- Practice Appreciation: Encourage your child to focus on what they have rather than what they lack. Expressing gratitude for what they can afford can help them develop a positive attitude toward their finances.
- Focus on Abundance: Help your child believe that there is enough money and that they can create wealth. Instead of talking about scarcity, talk about opportunities.
- Educate Themselves: The more your child learns about personal finance, the more control they will feel over their money. This knowledge can empower them to make informed decisions.
- Avoid Negative Self-Talk: Be aware of how you and your child talk about money. Negative self-talk can create a negative money mindset. Instead, focus on positive affirmations and self-talk to help shift the mindset towards positivity.
The Broader Impact of a Healthy Money Mindset
A person’s money mindset goes beyond their financial situation and can impact other areas of their life, including well-being, personal perspectives, and self-care. For example, studies have shown that having a scarcity mindset can be a source of significant stress, which can negatively affect mental health. Conversely, a positive money mindset can lead to a greater sense of security and freedom.
Furthermore, beliefs about money can influence how we view ourselves and others. A mindset centred on scarcity or fear can lead to a feeling of being undervalued and a reluctance to take a risk in a career or ask for what you’re worth. An abundance mindset, however, can foster a sense of empowerment and a belief in one’s own potential, which translates into all aspects of life.
Books to Help Develop a Healthy Money Mindset
Reading is a fantastic way to introduce these concepts in a fun, engaging way.
For Kids (Ages 3-12):
- The Berenstain Bears’ Trouble with Money by Stan and Jan Berenstain: This classic book introduces children to the consequences of reckless spending and the value of hard work, saving, and budgeting.
- A Chair for My Mother by Vera B. Williams: This story shows a family saving coins in a jar to buy a comfortable chair after losing their belongings in a fire. It beautifully teaches the value of saving and working toward a goal.
- The Everything Kids’ Money Book by Brette Sember: A comprehensive guide that covers everything from how bills are made to how credit cards work and how to watch money grow through savings and stocks.
For Teenagers (Ages 13+):
- The Psychology of Money by Morgan Housel: This book is a must-read for teens. It teaches that your financial decisions are driven by behavior and emotion, not just math.
- Rich Dad Poor Dad for Teens by Robert T. Kiyosaki: An adapted version of the bestseller, this book helps teenagers understand the difference between assets and liabilities and encourages them to start building wealth now.
- The Barefoot Investor by Scott Pape: A popular Australian book, this is a simple, no-nonsense guide to managing money, paying off debt, and building a secure financial future.
- How to Money by Jean Chatzky: A visual guide that makes learning about money less intimidating, filled with infographics and exercises to help teens build an empowered financial mindset.
