The habits and values we teach our kids about money can stick with them for a lifetime—we want to get it right. Helping them develop strong money management skills from a young age can set them up for a lifetime of financial well-being. Luckily, even though the economy is in flux, the fundamentals for raising financially-savvy kids are still intact. Here are five things you can do to help your children learn about money and embrace financial literacy.
Start Early
You might wonder if there’s an ideal age to teach kids about money or a way to do it. Good news; as a parent, you know your child’s level of comprehension, so just go slowly; try not to overthink it; and make it fun.
For example, turn online grocery shopping into teachable moments. Let the kids use your phone’s calculator to add the cost of items going into the virtual cart. Have them help you with comparison shopping. Talk about the difference between needs vs. wants and what they’d rather spend their money on. Give them a challenge to see how much they can save. Be sure to introduce them to different forms of payment, like debit, credit and digital wallets.
Encourage Saving
It can be tough to convince kids to hold onto gifted money, like birthday or holiday cash, and sometimes it’s easier to let them have their way. However, teaching your kids to avoid impulse purchases—and to save their money so they can spend it later on things they really want—is a valuable lesson in delayed gratification. This skill helps them develop patience and critical thinking, setting them up for better financial decision-making as adults.
If you’re an adamant comparison shopper, have your kids help you find deals on a particular product, and treat it like a treasure hunt with a reward at the end that’ll go into a savings account. Turning saving into a game is a clever way to get kids excited about money management.
Teach Them to Budget
Sit down with older kids and talk about what a budget is and what categories it has, like fixed living costs, debt repayments, groceries, transportation, and entertainment. Work with them to develop their own budgets and help them understand the financial consequences of going over their budget. This will help them learn to prioritize needs over wants and how to set long-term financial goals for big ticket purchases.
Talk about the Future
Educating your teens about the concept and value of insurance, whether it’s life insurance, car insurance, or home insurance, will give them a head start for when they need to think about it as adults and make decisions on coverage. It’s also a good way for them to start thinking about the future. Broach the topic by asking them what kind of car and home they want when they get older—have them describe both in detail. Then, strategically bring up how important it is that they protect their beloved assets with insurance. They’ll be all ears.
Teaching kids about money and planning for the future is an important part of being a parent. The earlier you start, the better you’ll be able to prepare them for the future.