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How to Teach Your Kids About Money

How to Teach Your Kids About Money

| February 29, 2024

The more your child knows about money, the more likely they will have less debt, save more, and score a higher credit rating as an adult, according to the Federal Deposit Insurance Corporation (FDIC). Net worth and investing later in life have also been positively linked to financial education. 

But how do you teach your kids about money? 

It won’t be easy at any age. However, with time and intention, you can teach your children the basics of money — earning, spending, saving, and giving — to help them manage money responsibly throughout their lives. 

Your children’s ages will determine how much of any money lesson they absorb, but start early and teach often. This post will provide you with some general guidelines for how to teach your kids about money. 

Use a Clear Glass Jar 

Tiny, pink piggy banks are cute for young kids, but a clear glass jar is better for starting your lessons about money with little ones. Talking to your children about money and saving it in a jar allows them to see their money grow and connect what they see with your talks on saving. 

They may be young, but your children always watch and learn from what you do. They see you go to work, come home, and provide for the family. In this way, they begin to see a relationship between work and money. Don’t miss this opportunity to reinforce their observations by talking to them about your job and the money you make. 

And speaking of talking, hold family conferences about important spending decisions in your household — a new house, a new car, a vacation — and encourage your children to participate. 

Depending on the age of your children, they may be too young to understand some concepts. But including them in family financial discussions will let young ones know money is an important matter and allow older ones to glean from your financial wisdom about budgeting and making choices. 

Show Them and Let Them Practice 

As your children age, stay engaged and continue talking about different aspects of money. Invite them to help with grocery shopping or paying bills. 

Make sure they are watching you select items to buy, explain why spur-of-the-moment purchases aren’t made, or show them how to check out or pay bills. Once in a while, let them see you take money from their savings, hand it to them, and allow them to make their purchases. 

Having them spend their money is also a great time to teach about opportunity costs. When you’re shopping, you can explain how buying video games means they won’t have money for the T-shirt they want. 

Pay a Commission Rather Than an Allowance 

While the debate over allowances rages, many parents are starting to lean toward paying children a commission for chores instead of an allowance for no work. This helps reinforce the concept of earning money. 

You can begin instilling giving once your children are earning their money. Your children likely have seen you give in church or to a charity. You can encourage them to drop money in the collection plate or donate to charities as they begin to earn money. 

Continue Lessons With Your Teens 

Once your kids are teenagers, it might be more difficult to get them to tag along to the grocery store or bank, but keep talking and teaching them about money. You’ve laid the groundwork, so now you can have your children learn through direct experience. 

Here are seven ways you can help them learn and develop good money habits: 

  1. Help them find a job 
  2. Open a checking and savings account in their name 
  3. Talk to them about compounding interest 
  4. Get them to start saving for college 
  5. Explain why they should avoid student loans 
  6. Talk about the dangers of credit card debt 
  7. Build a budget 

Equipping your children with these responsibilities doesn’t guarantee they will manage money well, but it gives them the experience and knowledge to increase the likelihood of making good financial decisions. 

Use All Available Resources 

Don’t overlook other resources, such as board and online games, books, and websites to teach kids about money. 

As a parent, you’re busy with work and home. But the key to your children growing up to be good money managers starts with you talking and showing. Start it early and do it often to give your kids the best chance to learn how to handle money. 

Talk to a Financial Advisor 

Teaching children good money habits isn’t always easy, but it has lifelong benefits. If you need help talking to your children about money, a financial advisor from Good Life Morehead City can help with what to say and point you to resources. Get in touch to schedule a no-obligation discovery meeting.