Teaching money management skills is not a requirement in any school or college. Even though some institutions have begun to make efforts to include a lesson or class on the matter, the reality is that the responsibility rests on parents to educate their children on financial matters and shape their financial futures. This can be a daunting task, but financial discipline is one of the most valuable lessons parents can instill on their children. Educating your children on financial prudence early in life will help prepare them to take thoughtful ownership of their finances when the time comes.
Here are five ways to teach your children, no matter what age they are, financial responsibility and the value of such expertise.
1. Get your children involved
Many of our daily activities pertain to money or are related to finances in some way, and these occurrences can be turned into teaching opportunities. Do you have to run to the bank to deposit a check? Bring your child with you and tell them what you are doing and why it is important for you to do so. Even if you do most of your banking online these days, take a few minutes to tell your children what you are doing, so they can see what it means to be financially responsible. Even something as simple as bringing your child along to the grocery store can be a great teaching opportunity when it comes to comparing prices and value. Have your children help you pick out the items with the best prices and explain to them why one deal may be better than another.
2. Teach them to budget
Offering your kids an allowance can be a great way to teach them how to manage money and have hands-on practice doing so. Giving your kids an allowance helps your children think through a monthly budget and helps them plan how to make the money last for the month. Remind them that they do not need to spend all of their money each month. They can save some and watch the amount grow monthly when the allowance hits. If their allowance runs out before the month is over, remind them they need to be wiser about their money next month to ensure that doesn’t happen again.
3. Let them earn a little extra
Although you probably expect your kids to do help with chores and clean their rooms, consider giving them the chance to earn a little money for mini-jobs around the house in addition to their usual routines. This will not only teach them the value of working to earn money, but will also be a good opportunity to teach about saving the money they have worked hard for and watch that value grow as they complete additional tasks.
4. Show them the value of saving
Kids may love to spend their money on a toy, for the younger ones, or clothes and shoes, for the older ones, but make sure to teach them the value of thinking through a purchase. If they save their money, they could work towards a bigger goal further down the road, like a basketball hoop or a car. Use piggy banks and money jars when they are younger, and once your kids get older, take them to the bank and help them set up their first savings accounts. Being wise about their money and saving it will help them develop a sense of ownership and pride for their funds, especially as their account values grow over time.
5. Encourage them to focus on their futures
Familiarizing your children with financial obstacles is also an invaluable lesson for them. The biggest example of this is college. Some families may find themselves in the privileged position of covering college costs for their children, but a majority of families cannot cover the cost of education out of pocket and need to find ways to fund their children’s educations through financial aid. Involve your children in the process, so they understand the various forms of financial aid like grants, scholarships, work-study programs, or student loans. Having them understand this financial responsibility early on will help them develop a plan to work towards certain scholarships or programs or around effectively paying off their student loans when the time comes.
Don’t shy away from money conversations with your children. Too often the topic of money is skirted around as a topic the kids shouldn’t hear and as a topic exclusive to adults; however, making these conversations open for the whole family can help your children familiarize themselves with valuable lessons and habits that they can carry through into their young adult years as they strive to pursue financial independence.