One of the best things that you can teach your children that will help them out in later life is how to properly manage their money. Setting them a good example by managing your own money well is a good place to start. Depending on the age of your children, there are some age appropriate ways to help them learn financial responsibility without stressing them out. Here are some of the best ways to teach children about money and the best money habits.
- For older children who are about to fly the nest or head off to college, an honest conversation about different kinds of debt. Many college kids get into a mess by applying for credit cards they can’t really afford. Have a frank discussion about debt and make sure they understand what they can and cannot afford to pay back. Teach them about credit cards, loans, mortgages and short term loans for bad credit, so they can make informed decisions for themselves if they are ever tempted to borrow money.
- Model good money habits. Children often copy what they see their parents doing. They can be very observant, and may adopt the habits they see you modelling. If you want them to be good with money, try your best to be good with money yourself to demonstrate good habits. Shop on a set budget, use coupons and discounts to pay for everyday purchases and try to shop for used items when you can.
- Save for the future. Children can find saving very difficult as they’re so often tempted by the new big thing on the market, whether it’s a toy or the latest pair of sneakers. To help them to begin to get used to the idea, open a savings account in the name, and make sure they contribute to on a regular basis, whether that’s weekly or monthly. Encourage them to save a portion of their allowance if they get one, or to put away a part of any money they get given as birthday or Christmas gifts. Show them their savings statements to they can see their money growing and hopefully find that motivating.
- Involve them in the shopping. Get the kids involved in shopping for weekly household goods and groceries. At the grocery store, let them take charge of the shopping list and encourage them to choose the products with the best value. This gets them to consider brands, prices and multi-buy deals to work out what is the best saving. Talk to them about how to decide, so they can make these choices for themselves later on.
- Get them to wait to buy something they want. Learning to wait when you want something is a hard, but important lesson. Help to choose something they really need and don’t be tempted to give them any extra money to get what they want. If they want something, like a TV for their room or a new video game that they can’t afford, tell them to save up for it themselves and don’t help beyond the pocket money you usually give them. This teaches them to wait and to save for things they want.
- Let them make their own mistakes. Learning from your own mistakes is important, so try to step back and let your own children make their own mistakes with money. If they want something that you think they’ll be bored in a week, let them save and buy it anyway so they can learn about the errors of impulse purchases and not doing your research before buying.
- Help young children to understand money. For little children, the concept of cost can be hard to grasp. Help them to visualise money and the cost of things. Instead of giving them a piggy bank, give them a clear glass jar to save their money. Being able to actually see the jar filling up is exciting and helps them to understand what is happening. To help them understand how much things cost, use this money and show them. If they want a toy that costs £5, take them to their jar and take out that amount. Show them the money and then let them be the ones who hand over the money at the till. This is much easier for young children to understand than a lecture about money.
- Show opportunity costs. Allow your kids to make their own choices about how they spend their money, but encourage them to weigh up their choices. Remind them if they cave to an impulse purchase like buying a video game they’ve seen when they’re in the supermarket with you will mean they’ve gone back a stage on getting those trainers they’ve been saving up for. Help them to weigh up these choices.
- Give pocket money for a reason. Don’t just dole out money for the sake of it. Instead, pay your children for doing chores around the house like walking the dog, washing the car or loading the dishwasher. This helps to learn that money is something that you earn and that isn’t just handed to you. If they’ve earned it, they will value it more and not just fritter it away and expect you to hand over some more.
- Avoid impulse buys. Kids are often caught by something that want now, but try not to give in. If they’re asking you for a cool toy they’ve just seen or a pretty dress they like the look of, try not to give in. Instead, remind them that they have their own money if they want to buy something that they don’t need.
- Teach teens to be contented with what they have. Teenagers spend a lot of time online, and they’re always seeing the lives of others splashed across their feeds, and may start making comparisons. If they’re getting upset because someone at school got a brand new car for their birthday and you can’t afford to do the same for them, and start teaching them to be happy with what they do have. Remind them that they may have an older car, for example, but it gets them where they need to go, and some teens are probably envious of them for having a car at all.
- Give them their own bank account. Teenagers should have their own bank account to keep their money in instead of a piggy bank, especially if they want a part-time job to earn money of their own. Managing a bank account is a great way to start teaching them more financial responsibility.
- Start University savings. Teenagers should start thinking about saving for University. Encourage them to get a summer or a Saturday job so they can start earning money to use when they get there. Saving for something big is good encouragement and might help them learn to save and work hard.
- Get them on a budget. Older children can learn about budgeting. If they have a phone, download them a budgeting app, and start teaching them how you manage the household or your own budget. Balancing their money properly means they can learn how to better manage it after they move out.
- Help teens to work out how to earn money. Starting to earn as a teenager is a great start for a hard working spirit as an adult. Encourage them to use their free time, like school holidays as an opportunity to earn. There are a lot of ways they could earn. Could they get a part-time job? Could do they do jobs like babysitting for the neighbours or walking dogs around the neighbourhood? Could they advertise in the local area to do odd jobs like washing cars, mowing lawns or doing basic gardening work? Does someone in the family have a business that they could help out at?
Learning good money habits early on in life is a great way to build a foundation for a healthy relationship with money as they get older. Understanding about credit cards, loans, bank accounts, savings, and other money matters is a great thing for kids to learn. There’s a way to teach a child of any age about money in a way that they can understand. Whether you start your toddler with a savings jar or are nudging your teenagers to find a summer job, they can about money and how best to handle it.
Remember to have honest conversations at home about money and how it works. Let your kids ask you any questions that they might have about finances and try your best to answer honestly. Make sure they know that they can turn you if they have got into financial difficulty, so you can help instead of letting them get into a deeper mess. If they do this, try not to be angry and also try not to just bail them out. Instead, help them come up with a plan to fix the problem.
With these tips, you can raise responsible, money savvy adults, who know how to save and how to spend.