6 Tips for Raising Money-Savvy Kids
As a parent, you want to set your child up for success. And one very important thing you can do is to instill good money habits. Your little one might be years away from handling a household budget, but it doesn’t hurt to get some early practice in with managing their own money. Getting a head start on personal finance is sure to pay off (no pun intended) when they are adults.
Here are a few simple things you can do to teach financial savviness to children of all ages.
For Younger Children: Start with earning an allowance
Giving children an allowance is a great way to teach budgeting and saving. Even better? Giving them an opportunity to earn the allowance through chores.
This will help them learn the value of hard work and they’ll appreciate toys more when they’ve had to save for them. You can also teach them how to stretch their dollars by shopping for used items or waiting for a sale.
If the lesson sticks, they just might start asking for more chores, so they can earn more.
For Younger Children & Pre-teens: Help them open a savings account
Many banks offer free savings account for children. You can divide their allowance between money they can spend, and money to set aside for saving.
If the bank offers paper statements or online banking, they can see how their money grows. They can see that, with interest, the more money they save and the longer they save, the more their money grows.
Teens: Set them up with financial tools
Once they get into their teenage years, your not-so-little ones may want more spending money or get after-school jobs.
This is a good opportunity to teach them the difference between credit cards and debit cards, and discuss the importance of establishing good credit for the future. You can also let them use your credit or debit card, which lets them put the money lessons into practice and lets you track their spending. Tread carefully here though: it’s important to discuss what the card should be used for, set spending limits and monitor the accounts regularly. They should know that with great (spending) power comes great responsibilities.
All Ages: Have regular conversations about good money habits
Life is full of decisions about money, and so are opportunities to talk about them. You can explain why you don’t eat out every day and why you save your leftovers. You can discuss the difference between “I want” and “I need” when they ask for new toys or clothes. And you can talk about the advantages and disadvantages of buying in bulk.
But it doesn’t have to be all talk. You can make it fun for your little ones by having them help plan meals and trips. Since children are visual thinkers, you can create a chart for how much you need to save for a family trip.
For teens, ask them to think about a fun expense — maybe a car, a trip with friends or the prom — and help them come up with ways to save up. You can also talk to them about financial lessons you’ve learned — teens tend to appreciate honesty.
All Ages: Teach generosity
It’s important to know that money isn’t all about buying what you want. It’s also about giving back.
One fun way to teach the value of generosity is by setting up a “giving” jar, where the family can put loose change and any extra cash. When the jar is full, you can let your kids choose where to donate the money. Help them consider what causes they believe in. Knowing that even a little money can help others is a powerful feeling.
All Ages: Model good financial behavior
Like with pretty much everything else, children take their cues from their parents. Include your little ones in your coupon cutting routine. Have your older children sit down with you when you set a monthly budget. Include the whole family when planning and saving for a goal.
Opportunities to teach good money habits come up every day. Your children are more likely to learn if you keep the lessons fun and rewarding.
