How to Set Your Child Up for Financial Success
Teaching kids to be financially responsible is an important part of their growth and development. Even small children can learn basic finance lessons, if they’re presented in an age-appropriate way. Not only will this set them up for financial success through the rest of their lives, but it can also be an important bonding activity. The last thing you want is for them to move out at 18 and realize that they don’t know how to manage their own money, let alone apply for a loan, maintain good credit and put other everyday skills into practice.
Here’s how to teach your children healthy financial habits.
Get the conversation started
Even toddlers can understand basic monetary concepts—that’s why there are so many cash register toys. Part of the appeal is that they see their parents doing something, like handing a credit card to the grocery clerk, and want to imitate them. Take advantage of their desire to emulate you, and work a little financial education into playtime as early as possible. If your kids are older, they’re better equipped to understand concepts like bank accounts, credit cards, loans and other basic financial features. You don’t have to understand everything about finances to teach your kids good savings and spending habits. If there’s a “why?” that you can’t answer, this is also a great opportunity to show them how to find answers, whether through research, asking friends and family or talking to financial professionals.
Teach your kids about math—and money
Basic math skills are crucial to understanding money. You don’t have to be their “other teacher,” though. You can teach them plenty about budgeting, saving and spending in hands-on ways. For example, consider giving your children $10 at the grocery store, and asking them to figure out how to buy as many items on your list as possible with that money. Another way to make it fun (and profitable to them) is to encourage them to save part of their allowance. You can teach them about interest by offering 10 cents on the dollar for every buck they save.
Record your spending and saving
While your kids might not need to know how to balance a checkbook by age eight, you can still teach them the basic skills they need. Teach them how to track their spending by writing it down in a special notebook or on an envelope that contains their money. Even small habits like these will make a big difference when they reach adulthood.
Talk to your kids about household finances
As your kids get older, a great opportunity to teach kids to be financially responsible is by teaching them about how much things cost—especially if it solves the “but I want expensive convenience food” fight at the same time. Teens can be put in charge of a household expense, like grocery bills. Challenge them to see how far they can stretch the household budget.
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