We help our kids learn how to walk, talk, read, write, and even how to swim. So, why don’t we teach them about money? Recently, there has been an increase in interest in this topic as many states have passed legislation requiring financial literacy to be taught in schools.
Here are 5 tips to teach your kids about money:
The Value of the Dollar
Give your kids one dollar and let them go into a local convenience store. Let them see what they can buy. Help them understand the value of that dollar.
For example, say to your child “Every time we go to CVS, you get a dollar. That dollar can be spent at CVS that day, or you can save it for the next time we go, and then you will have two dollars.” This will get them in the habit of saving for bigger items that they may want to buy, like a larger toy. This is a great lesson in saving.
Speak Openly About Money
Money allows us to live for today. But one day, parents will be retired, and we will have to live off the money we saved. Help your children understand that every dollar earned does not have to be spent. Don’t be afraid to discuss these money matters, even if you think your children don’t fully grasp the concepts. You’re setting the groundwork for future conversations.
As parents, one of the first things we do after the birth of our children is to open a savings account in their name. Birthdays, holidays, and special occasions will sometimes come with envelopes of money for our kids, and we end up depositing that money into their accounts. When your children are old enough, take them with you to the bank. Share in the experience of depositing their money and use it as a teachable moment. It won’t be long before you’ll be there opening a checking account for them and that shouldn’t be the first time you enter a bank together.
There are many ways for your kids to enter the workforce. Babysitting, camp counselor, coffee shop barista, retail employee — the list goes on. If possible, tell your kids that you will match them on money they save in their bank accounts. This will get them into the habit of achieving a target and incentivize them to want to save more.
Rainy Day Fund
Life happens. It always does. Don't get into the credit card debt trap when you get into a jam. It's very easy for kids today to not build up cash reserves and, in the event of an emergency, must utilize a credit card. These lessons can be taught at a young age with children. Rainy Day Funds are a great way to teach the importance of debt and how to be ready for the unexpected.
These 5 tips should get you started on a path to talking about money with your children in an open and honest way. As they get older, more conversations will arise about credit cards, saving for college, buying a car, stock market investments and much more. To help your children understand the complexities of money-management later in life, it’s important to give them the tools when they’re younger so they can meet those challenges with a running start.