Children are often left in the dark about what goes on with the family’s finances. Early lessons set the stage for financial confidence in adulthood. Parents teaching responsibility prepares kids to manage their money independently. Though not all may be in practice now, it lays the groundwork for success, understanding, and financial security in the future.
Make It Fun
When starting the conversation about money with your kids, remember to keep the energy positive. While we want to warn them of the dangers and misuse of money, we don’t want them to be afraid of spending money. Keep the content at their level of understanding and make sure not to overload them with too much all at once. This will be something they’ll be learning and practicing over time.
While keeping it at the kid’s learning level, include some tools that can make it easier for them. Using games they already know, such as M.A.S.H., can make it easier to visualize finances and their goals later in life. This can be a stepping stone to looking at a budget and starting to save for the financial situation they plan to be in. In addition, these games and what they learn from them can be an easy resource for them to go back to when they’re older and put these skills to use.
Set up a bank account for your kids early to ease them into financial management and give them a starting point for their own. While they’re young, you’ll be the custodian making sure the account is safe, but it’ll allow them to be somewhat independent with their money as they grow up. Show them how a checking account and a savings account are different and explain when to use each.
To get them actively utilizing these accounts, you can start giving them an allowance. This gives them experience in a real-life situation where they earn and have to handle their money. An allowance shows them what their spending looks like and how to save that money for any bigger purchases they may want. It also gives kids a safe place to experiment with money, since they won’t be responsible for any major bills or payments, and there won’t be major repercussions if they overspend. The experience they have with their childhood allowance and bank account gives them first-hand knowledge to use in the future.
Showing your children how to budget their money early on can help them practice good spending habits they can carry throughout life. Give them options on the type of budget they could use, so they’ll have the tools to customize it to their needs and situations. A yearly budget versus a monthly one can provide them with different perspectives on their finances and where they can go with their money. Show them the different factors that would need to be taken into consideration when budgeting. This includes how much they’re earning, what bills need to be paid, and how much they should be saving. Learning to budget early on can give your children a foundation on how to handle their money while also giving them a safety net to make mistakes now in a low-risk environment.
When kids are learning how to create a budget, they can start using it to reach their financial goals. They can set smaller goals, such as saving a certain amount per month, or they can set bigger goals, such as being able to purchase something they’ve wanted for a while. Teach the satisfaction of saving by demonstrating how to set money aside, aiding in future savings for significant purchases like a car or home down payment.
Regularly check finances—what’s on hand, what’s needed, and income. Know how much to save and the time needed. Consider external factors. Recommend online tools for goal tracking. For younger individuals, creating a budget for specific items like a gaming system or phone can be more manageable. As they get older and their goals get bigger, they may need the help of online calculators and templates. When it comes time for them to save for a car, find a resource that can help you shop around to find a vehicle that meets your needs. Later in life, for a home, they might need help discovering how much house they can afford. Learning these lessons and how to save now can help them see all the different factors they’d need to take into consideration for a purchase of this size and what they need to prepare for.
Demonstrate available resources to boost children’s confidence in making significant purchases and assure them that help is available when needed.