How did your parents teach you about money? Mine were fond of yelling that money doesn’t grow on trees. That’s about as far as our financial training went. I’m determined to be a little more hands-on with my own daughter. The most important thing you can do is set a good example. The little ones are getting smarter faster these days. They’re watching you. Here are the 7 best ways to teach your kids about money:
1. Respect credit. If you’re whipping out the credit card to buy everything from food to expensive shoes, your kids are going to notice and think it’s that easy to get what they want too, even if they don’t have the money for it. Do not make credit cards a habit, and don’t let them open up lines of credit until they have the income to support it. Sending the kids off to college with a credit card that you’re paying for will not promote sound money habits or good fiscal judgment.
2. Use a budget. Show your kids how a budget works. This type of financial training should not be difficult – it really is basic math. Get a large white board or a flip chart to demonstrate (in rough estimates) how much money the family takes in and then how much is paid out in bills, groceries, savings and other expenses. This will show your kids that money isn’t just sitting around waiting to be spent.
3. Start saving. The classic piggy bank is a great way to show even your littlest kids that money is worth saving. Let them fill a bank with change or stash away any money left by the tooth fairy. Help them to experience delayed gratification. Instead of spending every dollar as they get it, show them how saving up those dollars can reap a larger reward.
4. Live beneath your means. Good money habits include not spending more than you earn. Flashy cars and designer labels will give your kids the wrong idea about what is important. Express an appreciation for people over things and include your children in making sound financial decisions. If you let them participate in choosing a reliable and safe pre-owned car over the fully loaded Hummer, you are teaching valuable financial lessons.
5. Learn to earn. If your children are not earning their own money, they are going to expect you to provide them with it for as long as they’ll get away with it. Assign chores every week and a corresponding allowance. Encourage age-appropriate jobs such as babysitting, lawn mowing and newspaper delivery.
6. Reinforce quality not quantity. All money habits should include good stewardship of what you have, whether it’s $5 or $5,000. If your kids see you making the most out of a modest income, they will learn more valuable financial lessons than if you were making millions but not managing it well – or at all.
7. Teach charitable giving. According to the Pearson Foundation, kids who see parents give to charity are more likely to give themselves. Part of the financial training you give your children should include helping those who have nothing. Those financial lessons will reach entire communities as well as your own kids.