Raising money smart kids begins at home. Growing up, I didn’t learn about money management in school. I learned from observing my parents and sisters. That’s why I think it’s important for parents to set good examples for their children in order to raise money smart kids. By showing them the ropes early on, they’ll have such a strong leg up in life.
Make Money a Part of Daily Conversation
Money is considered a taboo topic in our society. It’s considered impolite to ask how much people make or how much they spend on their purchases. While you may not be able to change society’s views on money, you have total control over how it’s handled within your household.
It’s healthy and beneficial to make money a part of your household’s daily conversation. It is important in helping your children establish healthy relationships with money. There are adults who don’t know how to handle money or are ashamed about their debt because they didn’t receive guidance during their formative years.
You don’t have to go out of your way to create profound money lessons. Financial topics can be found everywhere. For example, if you have a mortgage, show your kids how paying more towards the principal every month helps you pay off the loan faster.
Growing up, I didn’t really talk to my parents about money because I felt like it was an adult topic. Had I asked about money, I’m pretty certain my parents would have told me to mind my own business! Fortunately, I have pretty money relationship but I do wish I had known more about investing while growing up.
Make Savings Goals Your Family’s Goals
Is there something special that you’re saving for? Maybe you’re saving for a family vacation or a new family car. Tell your kids about these goals and share with them how much is needed to meet the goals.
Your kids may not be able to contribute money towards the goals but they can help in other ways. Ask them to help by turning off the lights when they leave the room. They can also turn off the water when brushing their teeth. Also, if no one’s watching the TV, don’t leave it on for no reason. Show your kids the reduction in utility bills and how much you’re able to add towards your family’s goals. Your kids will be so proud that they helped!
They can help in other ways. When you’re at the grocery store, explain that by not buying soda and potato chips, you’re able to put more money towards the vacation fund. This is an excellent way to teach your children about making sacrifices in the short-term in order to reap greater benefits in the future.
Let Kids Pay at Stores
This one is good for younger children. Pick a time when the store’s not busy or you might get some angry people behind you in the checkout line, lol. As you finish checking out, let your child hand over money to the cashier. Explain that you cannot leave with the cart of goodies until the money is given to the cashier.
This will help establish in your child’s mind that they can’t walk into a store, pick whatever they want and leave. In order to bring something home from the store, they have to pay money in exchange.
Money is Earned, not Handed Out
That brings us to the next tip for raising financially savvy kids; they need to know where the money comes from. Has the following ever happened to you? You tell your kids that you can’t buy them toys because you don’t have any money. You children look at you with innocent eyes and say, “You can get more from the ATM!”
To be fair, I can understand why children think money flows freely out of ATMs. With our busy lives, we run errands with the kiddies tagging along and try to get the tasks done as quickly as possible. Since no one tells them where the money comes from, it’s easy to see why kids think money just flows freely from machines.
Check with your work to see if it’s possible to give your children a tour of your office. If so, bring them around and share with them what you do for 40+ hours a week in exchange for a paycheck. Help your kids understand that if you don’t work, then there won’t be any money in the ATM.
Open Interest-Earning Bank Account
One of the best ways to get kids excited about money (other than giving them money) is to help them open up an interest-earning bank account. Many banks have accounts specifically designed for children so that they don’t have to maintain a minimum account balance.
Your children will be able to experience first-hand the power of compound interest. They can see how their money can grow by leaving it alone. It’s also a good way to teach children about financial responsibility and money management. If there’s no money left in their account, then there’s no money to spend.
When I was in grade school, my school enrolled kids in a savings program through a bank. My mom would give me a few dollars here and there which I would add to my savings account. Let me tell you, I absolutely LOVED checking my account every month. It was so fun to see the number go up without me having to do much at all!
Include Kids in the Budget Process
Many adults don’t know how to budget because no one ever showed them how to do it. Here’s your chance to help your children get a head start on their financial journey – include them in the budget process!
I’m all for transparency, but if you don’t to share your entire budget, discretionary spending is a good place to start. Include your kids when deciding how to spend your household’s discretionary funds.
Let’s say you allocate $200 per month for your household’s discretionary spending. Once a week, sit down with your child and talk about how to the budget the $200. Your child will learn that choosing to spend money on eating at a restaurant means less money available to spend on other fun activities. Budgeting is about setting priorities, deciding what’s important to you.
Teach Them About Investing
Give your kids some Monopoly money and let them pick a company to invest in. Once a week, sit down with them and check the stock price. You can impart basic lessons on topics such as risk, diversification, and long-term investing. Let them make mistakes along the way, that’s how they’ll learn.
Suppose your child decides to sell the stock at the first sign of trouble. That’s fine. Let them do it and allow them to learn from the experience. If the stock rebounds, he or she will learn to not be so impulsive. Should the stock continue to tank, motivate your child to find out why. Investing in the stock market is not just about making money. Your child will also learn to think logically, pay attention to the news, being patient, and analytical skills.
How do you share money lessons with your kids? What works, what doesn’t?