Growing up I wasn’t taught how to handle the household finances, let alone money in general. When I started earning an income, I didn’t know what to do with it. When raising a child you want nothing more than to set them up in life. You want them to be resilient and successful. Below we look at few important aspects of finances to help set kids up for the future.
Talk money with your child
Research shows that many parents simply don’t discuss money with their kids. Open discussions with your child or answering questions in a non-emotional way helps kids understand. We certainly don’t want them to be scared or stressed about money. Here are some ways to incorporate talking finances with your child. Keep it simple – this way they can understand.
- Explain the importance of saving each month. If you create the expectation that savings is like a bill, it can become more of a habit.
- Take your children to buy groceries. Explain the budget and let them help make the selections. You may end up needing to put some items back if you’re “over budget.”
- If budgeting is going well, encourage them to use what’s left for doing fun things. (But remember, doing something fun doesn’t mean you need to spend money.)
Value of Money and Values Around Money
Teaching children restraint is just as important as providing for them. We may want to give our kids everything they ask for but doing so could have negative consequences. A young adult that hasn’t been taught restraint may find it difficult to exercise control over money. One way to avoid this problem is to get kids to make their own financial decisions and have them understand that there might be trade-offs involved instead. For example; if they want something, they may need to give up something else.
Start teaching financial responsibility with these practical ideas
Below are simple, realistic ways to teach financial responsibility to kids – regardless of age.
- Give them real money to manage. Make your kids handle cash and count change.
- Teach the Save, Spend, Give model. A basic choice we all make with every dollar we earn. With older kids, it’s okay to do this in bank accounts with budgets. For smaller children, you can get three labeled visible jars where each child can make a decision with the money they earn to see the result. Make sure to teach them to save for a goal that’s easy to reach (a special toy) and for a goal that feels far away.
- Encourage them to save by matching the funds they set aside for savings. Explain why you are doing it and how you are able. For example; rather than buying a car for them, encourage them to save money and provide matching dollars as an incentive.
Creating an environment of financial awareness and encouraging them every step of the way is key. Succeeding or failing in small ways with money will help kids learn. And, they’ll likely have a much better viewpoint on financial awareness as an adult.