Now that I have children of my own, I reflect more frequently on the importance of money and the lessons I’ve learned the hard way. There are many financial habits I wish I would’ve learned long ago.
Teach your kids about money when they’re young. They need to know how to talk about it and handle it. Help them develop skills and habits that will get them off to a good start.
Here are a few basic principles for parents to follow when it comes to teaching your kids about money:
- Set a good example. It’s too easy to fall victim to the “Do as I say, not as I do” style of parenting. In reality, kids follow what they see you do more than what you say. If you hope to teach your kids about controlling their spending, you have to do it as well.
- Learn about money yourself. You can’t teach something you don’t know about. Take the time to learn about budgeting, investing, saving, reducing debt, etc. Pass this knowledge on to your kids.
- Teach your kids one thing at a time. Your kids are not going to become financial planners overnight. Don’t rush it. Plan to teach one lesson at a time, over the course of their childhood.
With these principles in mind, here are 11 lessons you can use to teach your kids about money:
1. Give your kids control of money.
Kids learn best by doing. Let them make mistakes. Talk about the mistakes with them. It’s better they make mistakes while they’re young, rather than as an adult. It helps them learn that what they want will not always be given to them. Show your kids how to earn, save, or do without. This can be as simple as giving your kids an allowance. I am a big proponent of kids having to work for their allowance, however. Even my three-year-old must make her bed and pick up her books each day in order to receive her allowance of 50 cents each week. By giving her charge of a little money while she’s young, she can learn how to handle more money later.
2. Teach your kids the value of saving.
As my kids watch their favorite cartoons, I hear them say “I want that” many times during the commercials. While this is proof that commercialism, materialism, and targeted marketing affects all ages, it’s also an opportunity to teach your kids about saving money in order to purchase items in life. Both my kids get really excited whenever they get the chance to put money in their piggy-bank. This is a simple way to help them start the saving process. As they get older, they’ll get the chance to go to the bank and deposit their money into a savings account.
3. Teach your kids the value of giving.
Another important aspect of money management is the value of giving. We choose to give to our church first, then other causes as the need and funds are available. Wherever you choose to give, teach your kids to join in the giving. Our communities need help from each of us. One day, the roles could be reversed and we might be the ones who need help. There have been times when my wife and I were working on how to cover a specific bill or pay for the next set of groceries. We were blessed when some friends surprised us with gift cards taped to our door.
4. Teach your kids how money can make money.
Investing is a great way to make additional money with little to no work. It’s one thing to save money and earn a whopping 2%, it’s another thing to take a bit of a risk and possibly earn much more. Investing works best when the money is not needed for the short term. If your kids are saving for some short term goal, the bank is a safer bet. But if your kids are saving money for a longer term goal, invest away! Teach them about the types of investments available as well as how to monitor the growth. This is capitalism at its finest.
5. Teach your kids that cutting expenses can help them reach goals quicker.
It’s simple debits and credits – money going out versus what’s coming in. If your kids can learn this simple concept (although many adults still don’t seem to get it), their ability to handle money will be solidified. If your kids are wanting to reach some goal with their savings, then cutting expenses will allow them to reach it faster. It’s common sense, but worth reiterating.
6. Show your kids how to create a budget.
Learning how to live within your means is an important aspect of daily life. Budgeting is a great way to help make this happen. It doesn’t have to be complicated. Simply sit down with your kids and go over their expenses, what big items they’d like to save for, the amount they can spend freely, the gifts they need to buy, etc. Obviously, make this age appropriate. Teaching your kids how to budget while they’re young will pay off huge when they are older.
7. Teach your kids how to pay their own bills.
Do your kids have a cell phone, car? Who pays these bills? Give them the amount in their monthly budget (unless they have a job to pay for these things) and allow them to pay the bills each month. It will teach them a valuable lesson for life. If you don’t pay things on time, they get turned off or taken away. You can monitor this process to assist them as they get started, but part of growing up is learning how to take care of yourself and living with the consequences of your actions.
8. Teach your kids about the dangers of debt.
Debt is not a concept my three-year-old can grasp yet, as she gets older she will. The amount of debt students have when they leave college today is staggering. Teach your kids about loans, credit cards, and other debts. Give them a credit card with an imposed limit. Teach them how paying the minimum payment on credit cards is often a fast track to getting deeper in debt.
9. Let your kids work for their money.
To this day, I’m convinced that I was born in order to mow lawns and do other chores for my parents. In fact, I think I learned to walk behind a lawn mower. Let your kids earn their money by doing chores around the house or getting a part time job. If they’d like to earn a little more money, give them extra jobs. It’s the way our world works, so let them have an age appropriate taste of it while growing up. It will teach them a better work ethic.
10. Teach your kids about materialism.
As parents, we often hear our kids say, “I want that.” Materialism runs rampant in our society. This is due in large part to the effects advertising, marketing, and consumerism. Teach your kids about the dangers of materialism. Teach your kids that the goal of advertising is to encourage people to buy stuff. When in reality, all you end up with is a house full of clutter and wasted money.
11. Teach your kids about impulse buying.
This is closely related to the previous point. Teach your kids to pause before buying something – to weigh the costs and their need before spending their money. Help your kids learn patience. This may be difficult, but it’s a valuable lesson we can all benefit from.