Good money skills are learned, not inherited. The lessons you teach and the examples you set for your kids early on will be the foundation for their future financial successes. When it’s time to start passing on these valuable life lessons to your children, here are some ideas, based on your child’s age, experience, and maturity, of how to do it.
Practice Makes Perfect
For many of us, money management can be a complicated matter, but the learning process of how to track and spend money doesn’t have to be. There are several simple and practical exercises to get your young children thinking about money’s important role in everyday life. Playing games, such as restaurant or grocery store, with your kids to demonstrate how money is used is a good place to start.
Later on, reinforce what your children are likely already learning in school — differentiating coins or using basic math skills, for example. Try giving them whimsical or mechanical banks to make saving money entertaining. A trip to the bank to see a teller to deposit their saved coins can become a monthly ritual you and your children do together. This exercise will not only help your children become familiar with saving but also teach them a little bit about the bank and how deposits work.
You also should look for opportunities to use common errands or outings with your kids as financial learning experiences, such as figuring out the change owed after a purchase or clipping coupons before you head to the grocery store.
Start at Home
Once your children get a little bit older, around eight to 13, focus on teaching them the value of money and smart ways to earn, save, and spend. You can start by giving your kids the financial freedom that comes with a weekly allowance. Chances are, at this stage, relatives are starting to give your children money as birthday or graduation gifts. These also are valuable opportunities to teach your children the steps to making sound financial choices.
Promote conscientious saving and spending habits by encouraging your children to determine a savings goal for their allowance or gift money. Support your children’s efforts by giving them chances to earn additional money, such as by mowing the lawn or babysitting younger siblings.
At this stage it is important to emphasize the importance of saving and the difference between needs and wants. Start to explain some basic banking concepts, such as how a savings account works or the purpose of a debit card. Move on to introducing additional concepts, such as investing and how it can be used to meet long-term objectives.
The World Outside
Teenagers want some independence — including the freedom to make choices regarding money. As they mature, encourage your children to take more control over their finances, but monitor the situation closely to prevent any serious financial missteps.
Arm your children with some lessons and strategies that will empower them to make good financial decisions as they mature and move forward with their lives. Explain that a debit card offers loss and theft protection and enables them to carry less cash, for example, or how comparison shopping before a purchase, perhaps for car insurance, will save them money in the long run.
Whether your children are beginning to take over their own car payments or living outside of your home for the first time, the ability to balance a checkbook, make payments online, and accurately monitor the activity of multiple accounts are critical life skills that will help ensure a successful financial future.