In today’s age it is vital to teach the kids about managing money, and if you won’t teach them, they will learn from somewhere else; which won’t always be the correct way of doing things. Here, we will show you how to teach your kids about money, and about the ways to manage it.
Pre-Schoolers and Kindergartners
1. Be a role model
Kids will follow their parents example, and copy whatever they do.
They will notice if you are spending too extravagantly, and are not saving much, or, if you are having an argument about money with your spouse. Also, they are there when you use your plastic cards to pay every bill, so they will eventually notice.
Therefore, try to be a good role model for your kids, and they will learn the good money habits from you.
2. Save money in a jar
It is great to use a piggy bank to save money, however a piggy bank doesn’t let the kids see the money growing in there. In contrast, a transparent jar lets the kids see how much they are saving.
Talk to your kids about it, and see them get all excited about the growing money. Through the jar they can see their four dimes, and a quarter, which yesterday were just three dimes, and this will inspire them to save more.
3. Make them understand that nothing is for free
You don’t need to lecture them every time about the prices of the stuff that the kids have bought. Rather, ask them to a take out a few dollars from the jar, and make them pay this money to the cashier in the return of the toys that they want.
This simple act will make them understand that there is a value of each stuff, and they should spend wisely.
Elementary and Middle Schoolers
4. Give commissions, not allowances
Don’t give your kids the money just like that. Make them understand that they need to do certain age appropriate chores around the house, like – helping in the kitchen, cleaning the house, or mowing the grass etc. This concept is explained in the book, ‘Smart Money, Smart Kids’, by Dave and his daughter, Rachel Cruze. This concept makes the kids understand the value of money, and how difficult it is to earn it.
5. Stay clear of impulse buys
You are visiting a supermarket with your young one, and suddenly you hear her scream from the backseat of your car – ‘Mom, Can we buy that cute dress?’ – happens often? At this age kids make a lot of impulse buys, particularly when it is not their own money.
In such a situation, make your child understand that they can buy the dress, but they need to pay for it with the commissions that they earned by helping you in the household chores. And, suddenly you will find them saying that the dress doesn’t look that cute anymore, and there is no need to buy it.
Also, ask your child to wait for at least a day before making a big purchase, as this will allow him to take the decision with a level head.
6. Make them help others
Once the kids start making some money, make them keep aside a small portion of their money for some charity. Allow them to donate this money in the church, or, let them help anyone they know off with this money. By being a giver, they will get a satisfaction, and this will help them in being a better human being.
7. Let them make some decisions
Teach them about the opportunity cost. Like, tell them that if they buy this play station, then they won’t have any money left to buy that school bag. This will prepare your kids to take decisions, and also face the outcome of these decisions, and will ensure that they buy the stuff according to the necessity.
8. Help them in making a budget
Ask them to put their mobile phones to some use, and use our budgeting app, EveryDollar. Ask your kid to prepare a budget for each and everything, no matter how small it looks. This will help them in their planning, and will be beneficial in the long run.
9. Teach them about compound interest
We understand that it is not as easy as it looks, it’s not easy to make the kids investment savvy. However, you need to make a start somewhere, and there is no better way of investing than getting your teen introduced to the idea of Compound interest.
The sooner you introduce your kid to Compound interest, the sooner they start investing for their future.
10. Set up a personal bank account
If you have been following the above mentioned tips, you would be able to set a bank account for your child by the time he/she is a teenager.
This will make money management easier, and will prepare them for managing a much larger account as they get older.
11. Teach them how to use credit cards
As soon as your child gets into college, they will start getting offers from various banks for credit cards. And, if you have not taught them about the dangers of credit cards, and how to use them wisely, they will become one of the victims of it.
Like any tool, credit cards can be a benefit or a burden. Teach them everything there is to know about these potentially plastic demons.
12. Make them save for college
Make sure that your teen starts saving for college. If they are working a summer job, make sure to put some of that saving in their college savings account. Tell him/her how proud you are that they are contributing towards their college savings account, this will make them more responsible.
13. Help them in making money
With all kinds of breaks in schools, teenagers have a lot of spare time, which can be utilized if they want to earn some extra money. They just need a good guidance, and, as a parent, you can help them with the option of various career fields, and, being an entrepreneur is one of them. As, these days, kids can start any business, and make profit from it.
14. Avoid student loans
You need to sit, and discuss with your child, “How are we going to pay for college.”
Tell them that they cannot fund their undergraduate education through student loans, however, discuss all the other options with them, like, applying for scholarships, saving, working while in school, attending a community college to start, differences between in state, out of state, and private colleges , etc.
15. Teach them contentment
In this age of social media, it is really difficult to protect our kids, and keep the innocence in them alive. Every time we log in online, we are bombarded with the photos of our friends vacationing at some picturesque foreign location, or someone posing with his brand new high-tech car.
And, if these pictures can give us adults a complex, then you can only imagine how your teenage child would be feeling when he/she would be seeing pictures of his friends getting gifted a new car, or a friend celebrating her 16th birthday in a yacht.
Here, you need to teach your children about contentment, and how these materialistic things don’t always bring satisfaction, and are completely inept at helping you find joy. It is your duty to teach them the importance of money, and give them self-confidence to not compare themselves with their friends, and be happy with whatever their parents can give them.
It is also the opportunity to teach them to be most proud of what they can provide for themselves.
Why You Need to Teach Your Kids About Money
Studies show that the average American fails to grasp a basic understanding of money. Why is this happening? I think the reason is three fold:
- Schools do not teach the basics about money. Home economics is not about the economy of the home. In most schools there is no real mechanisms to show how to balance your budget or what debt actually costs you over a long period of time.
- It has become impolite to talk about money. People find it offensive to be candid about how they handle their finances. This is probably because…
- Parents are misbehaving with their money. You see if we do not talk about it we do not have to evaluate what we are doing with our money. Simply put out of sight out of mind. If you are handling your money, poorly and you have children, the only thing you are teaching them is how to handle money poorly.This is a great reason to get your finances straight so that you can model proper behavior for your kids. Also, by reigning in your mismanagement, you are able to properly save for retirement and for their college. Now instead of saddling them with taking care of you in your old age and with large college loans.
So if you don’t know anything about money go out there and watch a video or read a book. If you don’t even know where to start I would look at I Was Broke Now I’m Not. It is the story of how Joe and Jenn Sangl went from spending more than they made to having enough surplus that they could take a 50% pay cut in order to follow their dreams. It teaches all the basic principles you need to win with money and has links to tons of free tools to help you along the way.
No matter where you start you and your kids are going to be better having the conversation.