One of the most important jobs parents have is to set their kids up for success in the future. And a huge part of that is teaching kids how to have a healthy relationship with money. While money isn’t the most important thing in life, we all know that life is much easier when you don’t have to worry as much about it. Teaching kids about the importance of making money, saving money, and spending money responsibly is a huge undertaking, but one that every parent must take seriously.
Here’s 12 ways you can teach your kids about money to set them up for success.
#1. Set a good example for your kids.
The biggest thing that you can do for your kids is to lead by example. If your children see that you have a good relationship with money they are more likely to have a similar relationship. Do you spend money rather carelessly, or do you think and budget before making large purchases? Do you have a savings account that you invest in? Do you have an emergency fund? Here are the top things that you can do to set an example:
- Have an emergency fund set up for the unexpected. Reiterate the importance and usefulness of having an emergency fund.
- Have a savings account or investment fund set up. Talk about the importance of setting money aside that is separate from your spending account.
- Look for sales. When you look for deals and sales, your kids will pick up on this behavior and mimic you.
Kids look up to those around them, even when you think they are not paying attention. The more that you emulate good behavior with your finances, the better off your child will be.
#2. Give them jobs, not an allowance.
An allowance is when you give your children money every week or month that is not tied to any actual task or job. Instead of this, try to give your children tasks that are tied to certain amounts they can earn. Make your bed every day of the week? That’s worth $5. Dust around the house? That’s worth $4. You can pick whatever chores and values work for you, but stick to your plan. If they do not do the work then they do not get the money. This will teach children that money is the direct result of work, and not simply a result of wanting it or asking for it.
#3. Use a clear jar to save.
Kids are very visual learners. For many kids seeing something on repeat is the best way for them to internalize something. If your children can actually see their savings build up it will emphasize the fact that working will increase their wealth. It will also serve as a motivator and make them want to save even more.
#4. Open a savings account with them.
Savings accounts are easy to open and easy to manage with the help and supervision of an adult. A savings account is a good first step towards money management and is a great way for you to teach your child about saving money and earning interest.
#5. Discuss financial goals.
Financial goals are important even when children are young. Goals give a purpose to the monotony of saving. Saving money is not nearly as much fun as spending money when we want, naturally. But teaching them to associate savings with working towards a goal will help them build a healthy relationship with money and work. As they get older you can define the difference between short term goals and long term goals. Short term goals may be saving for a certain toy or video game that they really want. Long term goals may be eventually buying a car or saving x amount of money for college.
#6. Teach them to make vs. buy.
When you make something you truly understand the value of something. The saying “time equals money” really rings true when it’s your own time that you are spending to create something. Sure, buying things is a whole lot easier than making something. But if you know that it takes 6 hours to knit a scarf, you will appreciate that scarf a whole lot more. And you will appreciate the value of the scarf if you do buy it elsewhere because you will know how long it took to make.
Furthermore, teaching your kids how to make things is just good common sense. Knowing how to make your own food, greeting cards, gifts, etc will also introduce your kids to a world of hobbies and interests that they may never have been exposed to otherwise.
#7. Warn them about credit cards.
When you are a kid credit cards can seem magical. A plastic card that you can swipe and magically get anything you want? Yes please! But as we all know that is definitely NOT the case. Credit card debt can get out of control quickly and have a debilitating effect on your and your family. Explaining the dangers of credit card debt and encouraging them to pay with cash that they can see and feel will help them to avoid this danger. Again, kids are visual learners so it will be more valuable for them to see and feel the money that they are spending. The money that they worked hard to obtain. The relationship between work and money needs to be established early on with children.
#8.Help them start a business.
Helping your kid to open their own business is a great way to help them earn money and learn a lot of new skills. The “business” can be pretty small scale–think lemonade stand or car wash–but the lessons will still be applicable. You can teach them about advertising, budgeting for supplies, and profit margins all while having fun with them over the summer.
#9. Give them a budget.
Budgeting is one of the most important money skills a person should have in their arsenal. It is important to teach your kids the difference between income and expenses and how they can track everything. Making up a sample budget or showing them your monthly budget will give them a sense of how to do it and why it is so important.
#10.Teach them to invest.
The younger you teach your kids about investing, the better. The magic of investing smartly is that your money will actually work for you. Explaining stocks and bonds to your kids may seem difficult, but if you introduce it in a fun way it can be very engaging for them. Allow them to pick a company and invest a small amount of money that is “theirs”. They will feel ownership and follow the investment. The more they follow it, the more they will absorb and understand how investing works and why it’s important.
#11. Encourage charitable giving.
It’s always good to encourage charity when talking about finances. It’s easy to get caught up in the dollars and cents of everything, but if you are able to give to those in need it’s important to do so. Whether it’s donating to an organization that you admire or giving to a local food bank, there are countless ways that you can contribute. Teach your kids that if they do not have the resources to donate money or items, donating your time can be just as, if not more, valuable. Having a healthy relationship with finances means that you understand the important role money plays in life, but you know that it is not the only thing that matters. Giving money and time is great not only for those in need, but it’s good for the giver as well.
#12. Teach your kids to be content.
This can be a tricky one, especially as your kids get older. It’s hard to ignore what other people have in the age of social media. Kids see others who have the best and the newest, so they will naturally want to have the best and the newest. But teaching your kids to appreciate the things in their own life will not only make them better with money, but will make them happier people overall. As with a lot of things, this attitude will start with you. Try to live your own life finding contentment in the things that you own.
Those are 12 ways you can teach your kids about money.
Money plays an important role in life so it’s vital that we teach our kids to have a good relationship with their finances. Money isn’t the only thing that matters, but having a balanced life of spending and earning will help to set them up for success in the future.
A balanced budget is one of the most important money management tools you can teach, so it’s important to lead by example. If you are looking to free up some more money in your budget, think about refinancing your car loan. Contact Auto Approve today to see how much you could be saving!