SEVEN MONEY HABITS TO TEACH YOUR KIDS
As a parent, you have many things to teach your child, but one of the most important is proper money habits. It’s typically not something they learn in school, so the pressure is on you to ensure your child goes into adulthood understanding how to handle his/her money well.
Since you are your child’s largest role model, use this opportunity to teach your child these seven money habits that will help him/her have financial success.
Save in a Piggy Bank
Saving is one of the most important money habits you can teach your child. You can start this at a young age, just make it as visual as possible.
For example, instead of a piggy bank, use a clear jar so your child can see every time you throw money into it. At a young age, they won’t understand the value of the money that’s adding up, but they can understand that the jar gets fuller every time you put money into it.
Seeing you do this often will make saving natural for them rather than a foreign idea.
Saving for Things He/She Wants
Not every penny your child saves must go into the piggy bank. If there’s a toy or other item your child really wants, help him/her learn how to save for it. Rather than giving instant gratification, let your child see how to work for something.
Whether you pay an allowance or you set up specific tasks so you can ‘pay’ your child to buy the item he/she wants, it sets the tone for working for what you want rather than just expecting it.
Learning to Save, Spend, Give
As your child gets older, you can help him/her split up any earnings or gifts into save, spend and give categories.
The save should be money they put away so they can’t touch it. If your child is old enough to understand what a bank account is, open one in his/her name and let your child make the deposits. This gets your child used to putting money away and saving it for a rainy day.
The money in the spend category is what your child can spend. This doesn’t mean the money must be spent, but it’s at least money they have when they want something. They don’t have to think about the money in this category as much, but if there are multiple items he/she wants to use the funds on, your child can learn to make decisions.
The give category teaches your child to give to someone other than him/herself. Let your child choose who the money goes to whether it’s a local charity, a charity online, or someone your child personally knows that could use some help.
Learn about Credit and How it Works
As soon as your child hits the elementary years, start talking about credit. Just like young kids pick up foreign languages easily, your child can learn about credit early too. Show your child what it means to buy on credit and why it’s not a good idea.
If you’ve already laid the foundation about saving, your child should already be good at saving for goals and will understand better why he/she shouldn’t buy on credit. Teach your child about how proper use of his/her credit will lead to better opportunities when they are older to get the money they need for larger purchases, like buying a house or car.
Learn the Difference between Wants and Needs
Kids often think everything is a need when in reality, most things are wants in their younger years. Teach your child the difference between a need and a want and how to save for the wants.
Needs are things you need to survive. You couldn’t live without clothes, for example, but you don’t need high-end designer clothes that make you go broke. You need food, but you don’t need to eat out at a restaurant.
Give your child simple examples, he/she can understand, and then let your child tell you different needs and wants in his/her life.
Show the Importance of Emergency Funds
You don’t have to share all the bad things that happen in your life with your child, but showing him/her how you save money in an emergency fund so when bad things do happen, you can pay for them, sets the tone for saving.
Show your child that money doesn’t grow on trees and unexpected things happen. Car accidents, house repairs, or falling ill are all things you didn’t plan on, but they happen in real life. If you didn’t have room in your budget for emergencies, you could dip into your emergency fund and pay for the problem while you focus on recovering from it.
Learn how to Budget
While you probably won’t show your child your complicated budget, you can set up a simple budget for him/her as soon as your child starts driving. When your child has responsibilities to pay for, show him/her how a budget works.
Layout the expenses your child has each month, such as car insurance, gas, and maybe a car payment. Next, write down the income your child has, whether he/she has a job or you pay an allowance.
Show your child how to work the numbers, so the expenses fit in with the income and leave enough room to save at least a portion of the funds too.
Final Thoughts
Include your children in your financial decisions to the degree that they can handle it. Even from a young age, you can show kids how to save money or how to work to earn something they want.
The more natural it feels to kids to save, budget, and avoid using credit to buy things, the more likely they are to head into the world with a head on their shoulders and a positive mindset when it comes to dealing with money.