My parents did a lot of things right. They did their best to instill in me and my four siblings essential life skills that would mold us into responsible and productive members of society.
But there’s one invaluable life skill that they failed to teach us about: personal finances.
I am determined not to make the same mistake with my own children. I want to provide them with the financial skills necessary to make good money decisions.
Here are four valuable money lessons you can start teaching your children today:
1. Money doesn’t grow on trees
It’s important to teach your kids that money doesn’t magically appear out of nowhere. Money is earned.
A great way you can hammer this point home is to pay your child an allowance for completing chores around the house. If you don’t like — or don’t believe in — paying your kids to do their regular chores, maybe you could think of an extra task for them to do in addition to their chores. Then, pay them for the extra work.
As financial writer Cameron Huddleston says:
Regardless of the approach you take, the key is to give your kids a chance to earn money so they’ll be motivated to work for money and will have a chance to manage money on their own.
2. The importance of sticking to a budget
I’ve always struggled to keep a budget, but I’m hopeful my kids will do better if I teach them simple budgeting skills when they are young.
When my kindergarten-age daughter goes to the grocery store with me, I let her hang on to the shopping list. She helps read the items on the list, and then we find them at the store.
We compare prices, and I let her help me select one of the cheaper-priced items. I also try to stick to my list so I can model the importance of avoiding impulse purchases.
3. How to differentiate between wants and needs
I talk about this a lot with my kids. When we’re shopping, they tell me about their “needs,” often listing items like fruit snacks, new shoes or the latest Captain America or Shopkins toy.
Then, we discuss what we truly “need” for the week, such as food, gas for our car, and money to pay for our house and heat. My 6-year-old is beginning to understand this concept, but my 3-year-old still insists that treats and juice are needs. It’s a work in progress.
4. How to save
The right technique for teaching your kids how to save money likely will vary with the child’s age.
You can start with a piggy bank. Once your child’s bank is full of money he or she either earned or collected, take the piggy bank and your child to your bank and set up a savings account if the child is around age 8 or older.
If your children are younger and want specific toys or other items, set aside a jar with the amount they need to save to purchase them. If they really want that goodie, they may surprise you with their super-saving money skills!
For more tips on how to talk money with your kids, check out “What Kids Should Know About Money at Every Age and Stage” and “6 Lessons That Turn Kids Into Money-Savvy Adults.
How do you teach your kids about money? Share your comments below or in our Forums. It’s a place where you can swap questions and answers on money-related matters, life hacks and ingenious ways to save.