Raising financially savvy kids can be a challenge but it is one that should be met head on. By taking the time to teach children about money when they are young, you could be saving them a lot of stress when they are adults. Below are three ways parents can start instilling good money habits in their kids.
What You Need to Know
#1 Be Transparent
There is no need to divulge every dirty detail of your finances to your children, but letting them be involved in the household budget can be a valuable learning experience. Instead of just telling kids “no”, take the time to explain to them why you cannot afford something at the time. Show them some of the other financial obligations you have this week, such as groceries or cell phone bills. Simple steps like these will help you teach your child the difference between “needs” and “wants”.
#2 Make the a Budget
Instead of giving your kids an old-school allowance, consider “paying” them instead and have them budget their money. Give them a couple of piggy banks to use as their “bank accounts” and let them put budgeting into practice. For example, give them piggy banks for spending, saving, and Christmas presents. Putting money into their savings piggy bank will teach them that money can be put away for later and the Christmas presents piggy bank can show the value of spending on things other than themselves.
We all know how easy borrowing is compared to actually paying it back, and the sooner kids learn the better! Don’t be afraid to loan your kids money and expect repayment. Teaching children the responsibility that comes with spending on credit will be invaluable to them in their adult life.
The Bottom Line
You are your children’s greatest teacher and teaching financial skills should be at the top of the priority list. The financial landscape is changing with increased debt loads and high cost of living. Having good money skills is going to be non-negotiable and the earlier you start teaching your kids the better.