Teaching kids about money when they’re young lays the foundation for responsible money management later in life. Children whose parents emphasize the importance of financial literacy and encourage them to spend and save thoughtfully develop a healthy perspective on money.
It’s never too early to begin teaching your kids about money. But doing so is not as straightforward as you might assume. Some parents don’t feel confident enough in their own knowledge of financial matters to be comfortable teaching their kids about money. Others believe it’s inappropriate to burden young children with conversations about money or think, mistakenly, that children are too young to understand financial concepts.
In fact, researchers from the University of Wisconsin-Madison studied the behaviors and attitudes of fourth and fifth graders who were exposed to financial education and concluded that “younger students can learn financial topics and that learning is associated with improved attitudes and behaviors which, if sustained, may result in increased financial capability later in life.”
Beth Koblinger, author of the New York Times bestseller “Make Your Kid a Money Genius (Even If You’re Not),” wrote an article for NPR’s Making Sen$e in 2018, in which she described her encounters with parents of all economic backgrounds during a recent book tour. She realized that all parents, whether very wealthy or middle-income earners, had the same questions:
When should I start talking to my kid about money? How do I teach the value of the dollar? How do I convince my kid that college is worth it? In her book, Koblinger emphasizes the fact that opportunities to talk to kids about money happen naturally as we go about our daily lives. Parents can take advantage of these “teachable moments” when they arise to help their kids begin building the foundation for a lifetime of financial success.
Lessons & Activities by Age
Researchers from the University of Minnesota suggest focusing “children’s education about money on the concepts of earning, spending, saving, borrowing, and sharing.”
This is a good time to start explaining that material goods cost money. Give them a piggy bank, or better yet, help them establish spending and sharing jars, which will allow them to see what happens to their balance depending on the decisions they make.
Talk to your preschooler or kindergartener about sharing with others. Show them how to set financial goals and how to meet those goals.
And remember, parents have the greatest influence over children’s money habits, and at this age, your kids are looking to you to set an example and guide them.
Elementary School and Middle School: Ages 6 to 14 At this age, you can let your child help with the grocery shopping, walking them through your decisions to shop at certain stores, seek coupons and sales, and select certain brands according to pricing and your budget.
You should also begin discussing big-ticket items with them. Koblinger included an example of how a friend of hers used car shopping as an opportunity to teach his 10-year-old “smart ways to save, how to see through clever marketing, how to negotiate prices, and how to avoid the pitfalls of loans.”
You can even teach children this age about compound interest, using real data as opposed to trying to explain the concept in the abstract.
High School: Teens Ages 16 to 19 By the time your child reaches high school, he or she should be capable of understanding more sophisticated money management concepts and have a level of financial literacy that includes knowledge of earning, saving, spending, and sharing at the very least.
Credit card companies target college students, so you’ll also want your child to be aware of the dangers of maxing out credit cards, how interest works, credit limits, and the importance of building credit responsibly.
Talk to your teen about the value of money. This includes emphasizing the difference between wants and needs and making sure they know your values when it comes to money. These conversations won’t be easy, especially when they see their friends wearing designer clothes and whipping out their parents’ credit cards when they go out.
Just remember, you’re not alone. Every parent who cares about their child’s financial well-being and wants to instill positive values must say no to their kids at some point. And, just as your parents told you long ago, it’s for their own good.
From games to $mart Quests to printables, we are constantly creating Money Mammal-themed banking activities for kids. These entertain and engage children early (elementary school or before) with topics aimed to provide financial education for kids. I think we’re long past the idea that teaching kids about money are going to read long lines of text on a screen about a topic that can be pretty darn dull without a singing monkey, of course. Here are a few simple ideas:
For Parents: Cash Transactions When you go to the store next time, pay for your transaction in cash, and have your child collect the change. This is obviously for the younger kids, but it will help start a discussion about money and how it works. Let them keep the coins too. It’s important for them to see some physical cash exchanged since the use of an ATM card might seem like magic to them.
Start a Conversation When you’re at the store, discuss the rationale behind each purchase, including whether it’s something the family needs or wants, the level of nutrition (Not everything has to be good for you; hello, ice cream!), and perhaps even the difference in cost between what you’re purchasing and brand-name or generic item.
Family Goal Jar At home, start a family goal jar to save for something you all might want. This could be money for an upcoming vacation, an electronic item, or whatever the family might want but can do without right now. This will help kids start to learn about goals, delayed gratification, and teamwork.
For Teachers: Needs vs. Wants activity Hand out two pieces of paper per child: one for want and one for a need. Instruct the kids to draw a picture of a need and a picture of want on each of the pieces of paper. Then invite them to bring up one or both of the items and explain why they drew what they did. It’s a good idea to introduce this lesson with a discussion about the key needs (things we all HAVE to have, such as clothing, food, and shelter) as well as want (things that we LIKE to have). The latter is pretty easy; just ask them if there’s anything they ever want when they go to the store. Hands will shoot up! When you go through the activity, you’ll likely encounter “conditional” needs, ones that are dependent on the situation. As long as their logic is sound (e.g. You need a basketball to play hoops.), then let them go have some fun learning.
Setting goals This one is easy and powerful and might even be better done at home. Have them set a saving goal, and make sure that it’s SMART (Specific, Measurable, Attainable, Relevant, and Time based). Find some jars, have kids bring them in, and have them paste their goals right on the jars. Tell them to put them somewhere they will see as often as possible. They may not fully understand the term, but tell them that they’re learning to “visualize” by doing this. You can even expand this conversation beyond money; setting goals is a powerful life skill.
Sharing money Tell the kids a story about how you’ve helped in the community and/or donated to organizations that you think do good work. Lead a discussion about ways they can help out in the community. Hand out paper to each of them to write down or draw ways that they can see themselves helping or giving back.
As a parent, we all want the best for our children. Providing them with the skills and knowledge to navigate through life is one of the most important responsibilities of parenthood. This includes teaching them about smart money management. Children learn more about money from their parents than from financial education for kids courses taught in school.
Here are six tips for teaching smart money habits to your kids.
Prepare in advance with free online resources. There’s no need to take a college-level finance course before talking to your child about responsible money management. Select a topic and learn more about it from a reputable website.
For example, learn more about credit reports and credit scores by reading articles found on the websites of the three major credit reporting bureaus: Experian, Equifax, and TransUnion. Your financial institution might also provide free resources, such as blog articles, educational videos, and seminars.
Start early. Before you hand over a credit card or start giving your child a weekly allowance, have your first money conversation. Don’t wait until they’ve already overdrawn their student checking account to talk budgeting.
Use real-world examples. Credit card statements, credit reports, and cash register receipts can help make your teaching come to life. If you’d prefer to keep your personal information private, download sample documents from credit reporting bureaus and credit card websites.
Set financial goals. Let your child experience the rewards of responsible money management for themselves. Brainstorm short-term savings goals with your child. Some might include saving for a special toy or a trip to their favorite store.
Make saving fun. Hang a picture of their goal on the refrigerator door. Add a sticker to the image each time your child makes progress towards achieving the goal. Keep them motivated by offering to match their savings dollar-for-dollar for 30 days.
Review financial topics often. Plan to revisit specific topics and introduce new ones as your child ages. The savings lessons you give your child at age five will differ from the ones they receive at age 17.
Teaching Teens About Money can be a daunting task, but introducing fundamental financial concepts now can set them up for a stable future. Instilling the building blocks of saving, spending, and making money early on can help increase prepare your children to be financially wise.
Not sure how to teach kids about money? Here are six tools you can use to help teach your kids about money.
Give small children a clear piggy bank
Rather than using the traditional opaque piggy bank, use a see-through container to help young children see their savings visually. Money is an inherently abstract concept and the more concrete you can make it for children, the better.
Once your kids start learning math, it can be helpful for them to roll the loose change from their piggy bank so they can see how it adds up to form greater dollar amounts. Physically handling rolls of coins can help children conceptualize the building blocks of a dollar.
Create a budget from their allowance
Budgeting skills aren’t always taught at school, so it’s best to proactively guide your children as soon as they begin receiving an allowance.
There are various schools of thought on an allowance. Some people think it could either be earned based on a rate of pay done for household chores. Other parents provide spending money for their children as needed. Some parents opt for a hybrid approach where you only pay for chores that are outside what is considered “normal” everyday responsibilities.
There is no hard and fast rule on how much allowance to allot each week but whatever you land on, help your child create a budget to prepare them for bigger budgeting later in life.
Using the example of the clear jars, you could mark three jars as either savings, charity, and spending. Then, work with your child to decide how much of their weekly allowance to put into each jar. The visual of the jar creates accountability.
Help them open a bank account
As parents we must prepare our children to be successful in life and money management is a crucial step. One way to do this is to open a savings account. Children can see the interest rate earnings increase their savings over time and they’ll have access to real-life financial tools as they mature.
If your child is tech-savvy enough to go online, teach them how to navigate through a bank’s website and see how account statements are laid out. Similarly, having your child physically visit a bank teaches them bank etiquette and healthy financial habits, like keeping receipts and interacting with tellers. Plus, many banks have programs designed around children to make banking a fun and positive experience.
Teach your teens how to make money
By the time children reach their teens, they will need to have a checking account so they can spend money with a debit card on their own purchases. This places bigger importance on how to make money. There are many jobs done for cash so that teens can see immediate earnings. Cash jobs, which in turn also add job experience, might include:
Mowing lawns
Babysitting
Starting an online business
Shoveling snow
Getting a part-time job
Giving teens an opportunity to make their own money helps prepare them for adulthood and learn how to care about their finances.
Play games that involve money
Games that involve money are helpful for younger children to start understanding how money works and how it is used in daily living. For children and toddlers, try playing “store” by setting up a fake storefront and having them hand over play money in exchange for goods. With older children, playing games like Monopoly introduces them to how money works.
Teach your kids the concept of credit
Good credit is important for many aspects of adult life such as renting an apartment or buying a car or house. Understanding the concept of credit at a young age can help your children avoid bad debt when they become of the age that they qualify for credit cards.
Start teaching them how credit works. You can do so by showing them your credit report or discussing your mortgage or personal loans with them, if appropriate. As your teens mature into adults, start helping them prepare to build a credit score early.
You can teaching kids about money through both your words and your actions—sometimes when you don’t even realize you’re doing it. Talking finance to a toddler may seem daunting, but a Cambridge University study found that 3-year-olds are already capable of understanding money concepts, and that the financial lessons they’ve learned by age 7 will carry over into the rest of their lives.
The approach for these conversations will vary depending on a child’s age. The littlest ones obviously won’t be able to grasp the stock market or the nuances of a credit report right away, but you can start simply by explaining the concept of money and having conversations about how to use it. For older kids, think tweens and high-schoolers, more in-depth lessons from a parent about managing money can help them have confidence (rather than fear) as they prepare for their financial future.
Teach Your Kids the Basics of Budgeting
A budget is a financial plan based on your income and expenses. Learning to budget is one of the most basic and essential steps in financial education because it teaches you how to set goals, live within your means and manage your money responsibly.
The simple act of pushing your toddler in a supermarket shopping cart can be a start to their budget education, as they watch you consider one loaf of bread over another based on value and other factors. Backing up those experiences with conversations will help them understand why you checked the price tag and returned one loaf to the shelf.
For preschoolers and kindergartners, tell them you have a certain amount of money to spend on things like food. Load up your cart while making note of what the items cost, and stop shopping once you’ve used up your budget. Talk through your process in simple terms and convey a can-do attitude. For example, when you find a necessary item on sale, tell them that you now have more for something else on your list (or for an extra treat). These talks should be fun, not frightening.
When your kids reach elementary and middle school ages, you can get more detailed. Once they seem mature enough, you can start to share aspects of your household budget, including housing, car payments, clothes and entertainment. Explain the finite nature of a paycheck and how to prioritize your spending and save what’s left over.
You can be more candid with teenagers—to a point. Focus on challenges and solutions, but avoid instilling fear about your family’s finances. If bills are making you anxious, tell them why and what positive actions you’re taking to alleviate the stress, such as adjusting your budget. Another benefit: If your teenager is familiar with the household budget, they’ll better understand why you said “no” to their latest spending request.
Demonstrate Healthy Spending Habits
Kids of all ages will pick up on your attitude and habits with money naturally. Some tough concepts may have to wait or will require more detailed explanation, but you can steadily introduce new topics over time by using real-world examples. You can help teach your children healthy spending habits with purposeful exercises as well:
Arrange a scavenger hunt. While at the store, ask your kids to find a specific item at the lowest price and read the numbers aloud to familiarize them with prices. Try this online too—a search for the best price for an item online can teach comparison shopping. Set expectations. Before entering a store, clearly state that you will stick to your list. Verbalizing this intention can keep both you and your kids in line—and help you avoid fights as you pass the toy aisle. Demonstrate being frugal. Let your kids see you make choices as minor as packing a picnic lunch instead of dining at theme park restaurants or as major as opting for a budget ride over the luxury model. Communicate how the difference in cost can be put to good use. Turn impulse spending into lessons. When your child asks for something unnecessary, don’t just shrug it off. Instead, you might ask if they want the item as a future gift or want to set aside some of their allowance for the purchase, or earn extra cash for it. This can help them associate money with earnings and savings—a critical relationship that kids can grasp early on. Let them practice with plastic. Bank and prepaid debit cards are great tools for kids between ages 10 and 16. They can make withdrawals and purchases without the danger of debt, and learn how to spend within a limit.
Allow Your Kids to Earn Their Own Money
Giving kids income-earning opportunities can get them to focus on purposeful work and grow their unique personal interests. The possibilities are virtually endless:
Young Children Host a lemonade or baked goods stand for the neighborhood. You might even explain the concept of profit by going over how much it costs to run the stand. Bonus: Encourage them to donate what they earn to a local charity. Sell gently used toys. Selling no longer used toys, games and clothing in supervised garage sales or online can teach them about value, and how to reduce waste. Create and sell artwork, such as holiday cards. With your permission and help, they can even sell their crafty creations online to turn their hobbies and interests into real-life earnings. High School Students Take care of younger kids. Your child can babysit for local families or become a tutor, either in-person or online. Start a business. Whether it’s helping out at parties, providing pet care services or washing cars, adolescents can learn the ins and outs of building their own business. They can also create products or scour thrift shops and make a profit online, or start up their own digital shops through websites like Etsy or Poshmark. Obtain a part-time or summer job. A relatively straightforward but effective way for your child to learn the balance of time and money is through their first real job. Some families also choose to give kids a regular allowance. Instead of giving kids money when they need it, spacing out their allowance can instill an early sense of how to manage money over longer stretches of time. If they come to you for more cash, let them negotiate—perhaps taking on a few more responsibilities around the house can earn them an increase for their contributions.
Whatever your children do, carefully monitor their activities and be available for advice about setting fair prices, collecting payments and managing proceeds. You can even use an app like Goalsetter to help both you and your kids manage their burgeoning finances.
Teach Your Kids About Debt and Credit
Your children need to be aware that each time you use your credit card, you’re borrowing money. It’s important for kids to understand that a credit card isn’t something that provides infinite access to cash, and that you’ll have to pay back any purchase you make (possibly plus interest).
Highlight the importance of making good on your agreements with your lenders by using credit responsibly (for example, making on-time payments and keeping balance low). You can go over the ways you’ve used debt to do things like buy a car or purchase your home. You might even explain what a credit report is, and why credit scores are important. Teenagers especially should be aware that a positive credit report will help them rent an apartment when the time comes.
Credit cards are probably the type of credit you interact with most frequently, and they can be a great starting point. You may be inclined to instill an early fear of credit card debt, but don’t shy away from explaining how to properly use credit, and the positives that can come with it. Go over the steps you take to maintain a low balance and responsible payment history (the two most important components of a credit score).
Minors can’t open their own cards until they’re at least 18 (they may have to wait if they’re unable to be approved), but you can look into kid- and teen-friendly cards in the meantime. By making them authorized users on your accounts, they can charge (as long as you agree) but won’t be liable for payments. This can come in handy in cases of emergencies. Arrange a lower credit line for them so it’s safer for you while helping them begin their credit history.
Open a Savings Account for Your Kids
Saving for the future is an important part of any budget. Banks sometimes offer kid-specific savings options for caregivers to open in their name, allowing you and your child to jointly operate the account.
Alternatively, you can consider a custodial account. Kids won’t have the same access to their money, since this type of account sets savings aside until they turn 18, but it can be a useful option for kids learning the importance of maintaining funds for the future.
Make Sure Your Kids Understand Digital Payments
The shift from cash to credit has already made spending more abstract. Further complicating things is the fact that funds today are commonly exchanged online with the tap of a button in an app. This makes it harder for kids to grasp that money is finite. Whereas older generations grew up balancing a checkbook and counting currency in a piggy bank, your kids may only ever know to check their bank balance online.
When your kids were little, you frequently heard requests such as “Will you read me a story?” or “Can we go for a bike ride?” Now that your offspring have morphed into teenagers, their pleadings often involve asking for money—your money. How can you tame their cash demands and avoid the money wrangles, while also teaching teens about money financial responsibility? Here are a few ideas:
• Make the most of “teachable moments”—Look for opportunities in your day-to-day interactions with your teen when you can slip in a money “lesson.” For instance, if you’re out shopping together, you can talk about your own shopping choices or why you’re delaying a purchase.
• Provide hands-on experience—These types of experiences have more impact for teens than just listening to you talk. For instance, have your teenager make the grocery list for the week. At the market, he’ll see for himself how big a chunk of the family budget goes toward groceries.
• Model money monitoring—Sit down with your teen to go over her or his list of expenditures for the week. Discuss the following: Were these wants (things that just made you feel good) or needs (things like a new jacket to replace the one that no longer fits)? How could you have spent your money differently?
• Introduce plastic, perhaps—You’ll need to decide if your teen is mature enough to manage a debit card. You could give your teen a Velocity Community Credit Union VISA Debit Card or Secured VISA Credit Card to start building credit. Again, go over transactions together.
• Talk about the future—What will come after high school? If it’s college, what portion of expenses will the teen have to cover? Older teens also begin to think about career choices. This is a good time to talk with them about saving for retirement. It’s never too early to have that conversation.
Families can have good and serious reasons why they may fall into this trap, but the savings habit is an important one to help kids establish when they are young. Teaching kids about money delayed gratification when it comes to money can help them guard against unnecessary spending and learn to value establishing control of their money. With that in mind, here are 10 steps you can take to get your kids on the saving bandwagon.
KEY TAKEAWAYS Saving money is a habit that parents can teach their children at a young age. The first step is to explain important concepts such as savings, a budget, and goals—then keep the conversation going. Giving children an allowance can teach them the value of money—and of hard work, if chores are involved. Younger children might keep their savings in a piggy bank, but older ones might want to keep their money in a bank or on a debit card while working on their goals. Children can learn the importance of living within their means, which is one of the basic tenets of saving.
Discuss Wants vs. Needs
The first step in teaching kids the value of saving is to help them distinguish between wants and needs. Explain that needs include the basics, such as food, shelter, basic clothing, healthcare, and education. Wants are all the extras—from movie tickets and candy to designer sneakers, a bicycle, or the latest smartphone.
You can even quiz them on items in your home to drive home the concept. For example, point out items in their bedroom or the kitchen and ask them whether the object is a need or a want. This allows you to explain the idea that you have to prioritize what you spend money on, leaving some money for future necessities.
Let Them Earn Their Own Money
Two-thirds of parents said they paid their children an allowance in 2019, according to a survey by the American Institute of Certified Public Accountants (AICPA), with kids earning $30 per week on average, based on five hours of chores.2 If you want your children to become savers, allowing them to earn and save money provides them with the opportunity to learn how to use it. When you offer allowances in exchange for chores, they’re also learning the value of their hard work.
Set Savings Goals
To a kid, being told to save—without explaining why—may seem pointless. Helping children define a savings goal can be a better way to get them motivated.
If they know what it is they want to save for, help them break down their goals into manageable bites. If they want to buy a $50 video game, for example, and they get a $10 allowance each week, help them figure out how long it will take to reach that goal, based on their savings rate.
Provide a Place to Save
When your children have a savings goal in mind, they’ll need a place to stash their cash. For younger kids, this may be a piggy bank, but if they’re a little older, you may want to set up their own savings account at a bank or even get a kid-friendly debit card. Cards by the likes of FamZoo, gohenry, and Greenlight notify you when they make purchases and allow them to create their own savings goals.345
Have Them Track Spending
Part of being a better saver means knowing where your money is going. Tracking expenditures is a little easier with a bank or debt card app, but you can also do it the old-fashioned way.
If your children get an allowance, having them write down their purchases each day and add them up at the end of the week can be an eye-opening experience. Encourage them to think about how they’re spending and how much faster they could reach their savings goal if they were to change their spending patterns.
Offer Savings Incentives
One of the reasons people save in their employer’s retirement plan is the company’s matching contribution. After all, who doesn’t like free money? If you’re having trouble motivating your kids to save, you can use that same principle to ramp up their efforts.
If your child has set a big savings goal—for example, a $400 tablet—you could offer to match a percentage of what they have saved. As an alternative, you could offer a reward when your kid reaches a savings milestone, such as a $50 bonus for hitting the halfway mark.
Leave Room for Mistakes
Part of putting kids in control of their own money is letting them learn from their errors. It’s tempting to step in and steer kids away from a potentially costly mistake, but it may be better to use that mistake as a teachable moment. That way, they’ll know in the future what not to do with their cash.
Act as Their Creditor
One of the basic tenets of saving is to not live beyond your means. If your child has something they want to buy and feels impatient about saving for it, becoming your kid’s creditor can help to teach a valuable lesson about saving.
Say your child wants to purchase something that costs $100. You could “lend” the money and require payment from the allowance that you provide, with interest. The lesson you want to teach is that saving may mean delaying gratification longer, but the item you want to buy will end up costing less if you wait.
Talk About Money
In a 2021 T. Rowe Price survey, 41% of parents said they don’t like to talk with their children about money, with many expressing embarrassment about bringing up the topic.6 However, if you want kids to learn about saving, you have to nurture an ongoing discussion. Whether you schedule a regular weekly check-in to talk about money or make money chats part of your daily round, the key is to keep the conversation going.
86% The percentage of parents who need to either increase or replenish their emergency fund in the wake of the COVID-19 pandemic, according to a 2021 T. Rowe Price survey7
Set a Good Example
The T. Rowe Price survey found that only 59% of parents had any money saved for retirement, while only 55% had an emergency savings fund.8 If you want your children to become savers, being one yourself can help.
Getting your emergency fund in shape, opening a 529 savings account, or simply increasing your 401(k) plan contributions are all steps that you can take to encourage saving as a family activity. You could also decide to save for something together, such as a big-screen TV, a family vacation, or a pool.
Financial savvy starts at a young age. The sooner your children master effective spending and saving habits, the better off they will be later in life.
Here are six tips you can use to teaching kids about money and managing finances: Teach by Example First and foremost, children learn by example. If you spend money carelessly, your children will be more apt to do so. Be cautious of how you speak about money and treat finances in front of your children. Your tone and spending habits are likely wear off on them.
Don’t Use Money as a Reward or Punishment
Money is not something children (or adults for that matter) should feel they deserve or are entitled to as a result of behavior. Teaching your child to associate work and money – rather than expectations and money – will help them gain financial independence.
Give Children an Allowance
An allowance should be earned, not expected. Don’t give your kids money for daily chores considered the bare minimum to maintain a clean household, such as making a bed. Give your children extra tasks to earn an allowance, and teach them how to budget it. For instance, if they want to purchase an expensive item, they should save for it. You shouldn’t give them extra spending money on top of an allowance.
Encourage Older Teens to Get a Job
Teens are less likely to have a lighthearted attitude about money when they understand how difficult it can be to earn. Consider reducing or eliminating allowance at a certain age to encourage your teen to find a part-time job. A job outside the home can also teach teens responsibility, discipline and time management.
Open a Savings Account
Help your children open savings accounts in their own names. This will help them learn the basics of banking, and they’ll be able to watch their accounts grow or shrink depending on how they manage money. Talk to them about the importance of saving money for unexpected needs, which will encourage them to establish an emergency fund later in life.
Take Your Kids Shopping
Use regular shopping trips as opportunities to teach your kids how to shop on a budget, evaluate sales and use coupons. Create a shopping list and budget, and enlist your child’s help to prioritize and make purchasing decisions.
Tips to Teach Your Kids about Smart Money Management
Examine your attitudes about money. Remember thatmoney management for childrenis about how to handle money by watching their parents. Be careful to set a good example – and don’t be afraid to admit if you don’t know how to do it. Now’s a great time to learn together!
Give your child an allowance and let them make their own spending choices with it. As soon as your child understands that people use the money to buy things they want, give them a small weekly allowance. Raise the amount each birthday to keep it in line with your child’s reasonable personal spending needs. Encourage them to plan purchases in advance. Giving them an allowance helps you balance your budget too, but only give them as much as you can afford. Expect your child to help with family chores. Helping around the house is part of being a family. Give allowance strictly for learning how to manage money. It’s better for you child to make small “mistakes” now than bigger mistakes later on.
Provide extra income opportunities. Occasionally, offer your child an opportunity to make a small amount of extra income by doing an extra chore. Help them decide what to do with the extra money they earn.
Teach your child to save regularly. Set up a process for saving money in a piggy bank or bank account. Regularly monitor how much has been saved, and talk to your child about goals for using their money.
Help your child discover the satisfaction of sharing. Encourage your child to identify ways they can spend money on helping others.
Show your child how to be a wise consumer. Before your child buys something, review alternative ways of spending the money to emphasize the necessity of making choices. Teach them to comparison shop for prices and quality. Discuss how advertisers persuade people to buy their products, and encourage your kids to be savvy about commercials.
Teach your child a healthy attitude towards credit. When your child is old enough to understand what credit is, consider allowing them to borrow a small amount of extra money from you to make a major purchase. Negotiate how much your child will repay each week from their weekly allowance, and then be very careful about collecting the money and keeping track of the remaining balance each week until the debt is repaid.
Teach your child the value of wise investments. When your child is old enough to understand interest rates and rate of return, play an investment game to learn about alternative investment strategies and financial risks. Websites can be very helpful.
Involve your child in family financial planning. Let your child see you planning your budget, paying bills, shopping carefully, and planning major expenditures and vacations. Explain the affordable choices, and allow kids to participate in the family’s decision making process. Set a family goal that everyone can work towards.
As a parent, one of your many roles is to prepare your children to be successful in the next phases of their life. Knowing money management for children is a fundamental skill – and it’s never too soon for them to start learning. Here are some things you can do to ensure that they develop an approach to money that will serve them well throughout their entire life.
Make talking about money a daily habit Even as kids, they’ll be making frequent financial decisions. Spend or save? Hoard or share? So explaining in simple terms, the choices you make, and why, can build their understanding and help them make the right choices. For example, at the supermarket, compare the prices of different foods. With a limited budget, which would they choose? Candies to enjoy now? Then nothing for dinner? While they may choose short-term satisfaction, they’ll start to understand the implications.
Model good financial behavior Letting your kids understand that bills come in monthly and need to be paid on time, is also a good way to help them understand that it costs to live. Internet, electricity, water, the car – all need part of the monthly household income. Model good behavior by prioritizing these essential payments and letting them know when the sum required goes up or down.
Keep it fun Don’t let your discussions about money become too heavy or cause worry for your kids. Many money apps for kids such as MoneyInstructor.com have games and resources for teaching kids about money, managing allowances, and savings. For older kids and teenagers there are activities related to making money and starting a business. So when you have a budding entrepreneur in the family, it’s a great way to get them starting on the right foot,
Encourage savings We often underestimate the amount of cash our kids receive for holidays, birthdays, etc. While their first instinct is often to spend everything on something they want – today, you can help them develop a saving habit. With teenagers, for example, offer to match everything they save, and let them see the different that interest can make. Try to negotiate a balance between spending and saving, so they learn to enjoy the benefits of both.
Provide a fixed allowance Giving your child an allowance gives them the chance to make choices and to experience the implications. Make sure that you set clear rules for the allowance. If it’s tied to chores, those chores have to be done. Once the money has been spent –that’s it – they have to wait for the next ‘payment’ date to access more cash. On no account offer an advance – that’s only teaching them to borrow.
Discuss their choices While you want to allow them an appropriate level of financial independence so they’ll gain experience of handling their money, use their choices to help them draw lessons from their behavior. They’ll most likely make mistakes (which you’ll have seen coming), but these can provide some of the most valuable lessons. Just discussing positively – by asking the question ‘So what will you do differently next time?’ can help to prepare them to avoid repeating the same behavior.
Tim Connolly 