One thing most children and teens are not taught by their teachers is how to handle and take care of money.
Typically, the ones that learn this are taught by parents or siblings, or not taught at all.
Here are eight tips to teach your children about money.
1. Give them money of their own to learn with.
Experience is a great teacher, and having a little allowance money is an important way for kids to learn to deal with money. You might consider basing the amount on their age. It also helps to consider the cost of living in your area and what they’ll be responsible for buying with the money. After all, snacks and toys cost a lot less than clothing.
2. Help them set and work toward financial goals.
Before too long, your child will set their mind on something that costs a lot more than their allowance. This is your chance to help them learn to budget. It’s important for kids to learn that patience and careful spending can help them meet long-term financial goals.
3. Don’t hide your finances from them.
Sometimes parents feel like they’ll be putting a burden on their kids by talking about their finances. Those same well-meaning parents often end up with their own burden, as the kids want things that are beyond the family budget. Sharing certain aspects of your financial life with your kids gives them the framework they need to understand why you say “no” when you do. It also makes sure they won’t head out into the world blind.
For example, you might talk through some of your financial priorities with them. Explain situations where you’ve had to choose one thing over another (like a bigger home instead of a new car). Let them know how you felt about it, and why it’s important to make such choices.
4. Let them experience the thrill of earning their own money.
When kids make the connection between jobs and wages, it opens up a whole new world for them. Not only will they understand the value of hard work, but they’ll also learn to appreciate each dollar they earn.
5. Let them make mistakes.
At some point, your child will make a bad decision with their money. It’s important that you warn them ahead of time about whatever risks they might be taking (like buying a low-quality toy that’s likely to break). Once you’ve warned them, let them make their own decision.
When they get disappointed later on, help them understand what happened. But do them a favor and resist the urge to give them replacement money. After all, if you’re giving them an allowance and opportunities to earn money, they can build up the funds again on their own.
6. Help them become savvy shoppers.
Coupon clipping might be second nature to you now, but you weren’t born that way. The same probably goes for learning to compare prices, budget spending, use a debit card, watch for sales, or decide between brands. Your children need to be actively taught these same lessons.
7. Put things in terms they can understand.
Personal finance can be complicated, but it doesn’t have to be. The most important lessons that kids need to learn about money can often be boiled down to very basic concepts. For example, choosing to buy something means you have less money available to buy something else. When you work, you receive money in return. If you don’t have enough money for something, you need to save up for it. Get creative with your kids, and use whatever is handy to teach them lessons like these.
8. Give incentives for saving.
Saving is a skill that so many Americans have lost. You can help your child learn to save by rewarding them on the money they choose to save. For example, for every $10 left in their piggy bank at the end of the month, you could contribute another dollar or two. They might not be able to grasp the intricacies of banking, but they’ll certainly understand the extra bills in their wallet. And that’s a very valuable lesson in itself.