As a parent, you want to instill good lessons and habits in your children so they make healthy choices when they become adults and are no longer under your care. From teaching them good table manners to showing them how to do laundry, cook, and keep a home, you’re ready to give them the life lessons they need to be a success. However, you may not have considered teaching good money habits on that list. Many people don’t consider themselves qualified enough to teach their children how to make proper financial choices, but that’s not true. You don’t have to be an investment banker to give your children the tools they need to succeed financially. All it takes is a little basic knowledge, some patience, and modeling to help your children learn good money habits.
It’s never too early to teach your children good money, habits. Start by teaching them the importance of saving their money by helping them save whenever they get money for their birthday, Christmas, or other holiday. Rather than using a piggy bank, which is often opaque, use a clear jar so they can see their savings build. From a young age, children understand visually what it means to have more or less of something, so teach them that by putting away their money, that over time they’ll have more of it. When you’re at the store, bring cash so they can physically see money going towards purchases rather than using a credit card. Chances are they’ll understand the concept of paying for goods using bills overpaying with credit.
Once your child is in school and has a basic understanding of what money is and how to use it, you can build on their existing knowledge to teach them about opportunity cost and earning money. When you take them shopping, let them spend their own money so they understand the impact of their choices. If they have $20 to spend, they may not be able buy both toys that they want, so they’ll have to make a choice or decide to save their money so they have enough for both later. Letting them make these types of money choices can give them good money sense from a young age. You may also want to start letting them earn their allowance by doing household chores, so they understand the value of their hard work. This not only makes them realize that they must work for what they earn, but may also instill a good work ethic.
As your child ages, they’ll want some autonomy with their money. This may be a good time to encourage them to get a job and a bank account, which gives them a small taste of the real world. Letting them have control over their own account can teach them good budgeting skills. Once they start driving, you’ll also want to teach them about the importance of having insurance. Your local insurance agency may even be willing to talk to your child about how premiums work and why it’s important to have insurance. You can also show them your household budget so they can see how money comes in and goes out of your household. Doing this can help them understand that having a job doesn’t necessarily equate wealth and that you still must make smart financial choices as an adult. It may be tempting to help them when they make a mistake, but you should also show them that you won’t always be available to bail them out as adults, so if they stumble, try to let them come up with solutions to fix their mistakes.
Teaching your child to be financially responsible isn’t something that happens overnight. It takes careful planning and consistency to give them the skills they need to succeed in the real world.