Our financial habits are not only something we’ll use for our entire life, but they also determine the quality of our life. If we have the ability to save and prioritize our purchases, it’s easier to make big, luxurious purchases or invest in things like a house or car. But if we have a habit of giving into impulse buys and struggle to save our pennies, then getting by each month can be a difficulty. This is why it’s important for parents to teach them healthy financial habits from a young age so they’ll have skills that will translate well into adulthood.
It can be difficult thinking of age-appropriate ways to discuss finances with a child. After all, no parent wants to stress them out or make them feel concerned for over their family’s monetary situation. This list features ten tips and tricks that can help teach children how to spend their pennies wisely. From teaching them the importance of budgeting to how much things cost in the real world, if a kid learns to be fiscally responsible in childhood, then chances are these skills will stay with them and be of benefit when they finally have to start paying their own bills. Although finances can be a taboo subject or something we may not want to discuss with children, it’s better they become aware of the costs of living rather than assuming mom and dad can get them whatever they want.
9 Give Them A Commission, Not An Allowance
While an allowance teaches your child that they’re entitled to a certain amount every week, a commission can help them understand the correlation between hard work and making money.
After all, in the real world, we only bring home a paycheck if we show up for work. Set up a system in which your child earns a certain amount every time they complete a chore or help out in some other way. Not only will this give them incentive to complete their household responsibilities, but it will help develop a healthy work ethic and sense of accountability.
8 Encourage Them To Get A Part-Time Job
Perhaps the best way for a child to learn the value of money is for them to experience the work-force firsthand. Even if your child is still young, they can get a side hustle like delivering papers or babysitting for neighborhood kids.
Or, if they’re old enough, they can consider getting a minimum wage job at a retail store or restaurant. When they see how much an hour of their work is worth, it will help them to better budget and prioritize their spending. Even more, a part-time job will help them develop a sense of responsibility and work ethic.
7 Begin Budgeting From An Early Age
It’s important for children to understand that they can’t just spend their money on anything. When they reach adulthood, they’ll need to ensure they have enough funds to pay for the necessities. Of course, kids aren’t going to have a pile of bills to pay for every month like adults.
But if your child has a stay influx of money (whether it be from a part-time job or allowance) it will create good habits to have them sit down and create a budget or at least keep track of their spending each month. Encourage them to only spend a set amount on eating out or entertainment or ask them to contribute a certain amount each month to their phone bill.
An easy way to teach your child the importance of saving up from a young age is to collect spare change in a glass jar. Unlike a piggy bank, in which you can’t tell how much money is in there until you count it, a jar will provide a visual reminder of just how much your child is saving up. Seeing the jar grow in size will help encourage them to save even more. Getting into the routine of putting money aside will help them develop healthy habits that can translate into adulthood, meaning your kiddo will likely be quite the saver by the time they move out.
6 Show Them The Price Tag
It’s easy for parents to simply say ‘no’ when their child asks for something. However, this can be used as an opportunity to teach them about financial responsibility. Telling your child how much something costs will help them have a more realistic understanding of the value of money.
There’s no need to stress the child out or make them feel like they can’t afford something. Say that mom and dad can’t buy the item right now because they need to spend their money on other things, like groceries and the house. Simply explain that, if we buy everything we see and want, we won’t have money left over for other important things.
5 Make Them Save Up For What They Want
Even if mom and dad can afford to buy whatever their child wants, this isn’t going to teach them the value of money or hard work. Rather, it will likely make them feel entitled and used to getting their way. A valuable lesson you can teach your child from a young age the importance of saving up for something they want.
Encourage them to set aside their birthday money or a part of their allowance in order to buy something they’ve been eying for a while. And, if they simply can’t wait that long, encourage them to get some sort of side hustle that will bring in money even quicker.
4 Help Them Open A Bank Account
Many parents wait until their kids get their first job before they take them to the bank to open an account. But opening one at an event younger age will not only encourage them to put their money aside, but it will teach them about the perks of using a bank.
They’ll be able to see that they earn more interest with the more money they save, which will give them incentive to put their hard-earned cash away. Instill a rule where your child has to put a certain portion of their birthday or babysitting money away. Or, encourage your child to open a bond so they can start saving for when they go off to college. Trust us, they’ll thank you later!
3 Have A Healthy Dialogue About The Family’s Finances
The best way kids can get used to talking about finances is if they see their parents doing it. Of course, there’s no need to give your kids the nitty-gritty details about your money situation, especially if things are tight.
But when your child sees that mom and dad aren’t afraid to talk about money (like mentioning if you paid the hydro bill today or discussing ways you can save up for a big trip) will help normalize these topics in your child’s mind. They’ll be more transparent and communicative about their own finances in the future, especially if they need your advice on something.
2 Explain To Them How Credit Cards Work
You wouldn’t want your child opening a credit card before they understand how things work. But unfortunately, many young folks do run into trouble when they get their first card if they don’t realize how high interest can be if they don’t pay back what they owe immediately.
Whenever you use your credit card to pay for something- particularly if you’re buying something for your child- use it as a learning opportunity to explain a bit about how credit works. Kids need to understand from a young age that a credit card doesn’t translate to free or endless money. Not only do credit cards have a limit, but they come with a price if you’re not able to pay your bill on time.
1 Lead By Your Own Example
You can give your kids all of the tips and tricks for financial success that you can think of, but if you’re not living by your own words, then your child will have a hard time taking it to heart. Children learn by example, meaning they look to their parents’ behaviors in order to model their own.
If they see mom and dad constantly going for impulse buys, they’ll think this behavior is okay. But if they grow up seeing their parents be cautious about spending their dime, this will likely translate over when they reach adulthood. The bottom line is that you should always practice what you preach!