December 5, 2019
How to Teach Your Kids About Money
Five steps to set your kids up for their own financial success.
Set a good example.
Remember that your kids are watching how you spend, save, and borrow money. Look for teachable moments in everyday activities. Using cash when buying groceries or other common shopping can show children how money goes from one place to another. This concept can be more difficult with debit or credit cards.
Take opportunities to involve them.
Giving your kids hands-on experience can instill positive behaviors. Younger children can help compare prices or count change at the grocery store, while older kids can help estimate costs for a family vacation or purchase of a new car.
Introduce the basics of budgeting.
Early on, teach your kids to divide their allowance or other earnings for saving, spending, and sharing. Encourage your kids to set aside a portion of what they earn to save for a specific goal purchase, like a new bike or video game. Allowing your child to freely spend their budgeted spending money can teach them the value of their dollars and experience the consequences of an impulse purchase. For example, if they buy a cheaper toy now, they won’t have enough for the one they really want later. Whether it’s a local fundraiser or national charity, encourage your kids to donate to cause they care about. This teaches them how their money can be used to help others.
Let them manage their own finances.
Managing their own finances from allowance or odd-jobs helps teach self control and the difference between wants and needs. As your kids get older—or start earning more from odd jobs—help them open up a checking account and teach them how to use checks or a debit card. Opening a savings account can motivate your child to watch their savings grow.
Promote smart credit use.
As your child grows up and moves away to college, help them open up a credit account and set expectations for moderation and paying off the balance. Explaining responsible credit card management can set your kids up to build a positive credit history and solid credit score before needing to borrow money for a new car or apply for their first apartment.
Lay the foundation early and continue to encourage and praise the development of good financial habits. Any financial knowledge you pass on to your kids helps them build their confidence and financial independence.