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 teach your kids about 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.
For additional tips on teaching kids about money, check out our financial lesson plans developed for students in grades 1 through 5.