10 Tips for Teaching Your Kids About Money

Kids learn the basics in school—reading, writing and arithmetic. But schools avoid almost any instruction about money. My wife and I have, until recently, been guilty of not helping our 3 kids’ education in this area. Now that they are all teens, we are taking every opportunity to educate.?

Looking back, I wish that we’d started teaching them earlier; I believe it’s important to start talking about finances early, when kids are young. You can begin to share your values and help them shape their views on money in a culture that places a premium on “things,” not savings.

While we can’t completely shelter our children, we can teach them. It’s why I’ve created a guide of practical tips that I believe will help put your kids on the right path.

1. Teaching delayed gratification

This is the hard part – especially in this world of instant gratification.?Some of us are better than others, but few have truly mastered – the art of patience.

Look at it another way for kids. Anticipation can be half the fun! It’s the journey. Think about it: your kids awaiting the arrival of Santa, or the excitement that precedes going to an amusement park or on an upcoming family trip.

If they want to buy a pricey item, help them save for it. You can lend support by setting up various methods for savings. We remember the piggy bank. Money goes in, but never really comes out. Instead, set up three jars. One for savings, one for giving, and one for spending.

2. Incorporate giving it away

Giving has always been an important part of the finances for my wife and I, and we feel it is something our kids should also appreciate.?For that reason, I believe the giving jar is as important, if not more important, than the savings jar.

Do your children have a cause that resonates in their heart? Do they want to give to their church? Is there a local food bank or animal shelter your daughter or son can assist with donations?

Learning to let go and help those who are in need will create a stronger sense of altruism and selflessness that, if taught early, will blossom in them as adults.

When it comes to charity, let their treasure follow their heart.

3. Kids need money

Theory without practice won’t work. Kids need a hands-on lesson. You may start with an allowance (some refer to it as a commission!)—you may pay kids for various chores, or both. That’s a parenting preference, and there are advantages to both.

What is an appropriate allowance? According to a study by RoosterMoney published by?The Balance, the weekly allowance earned by a four-year-old averages $3.76. At eight years of age, an allowance averages $7.27 per week. At 12, the allowance is $9.85, and $12.26 at 14.?The study offers reasonable guidelines, but you may adjust at your discretion.

What about birthday gifts, Christmas gifts, and so forth? This is where we lean heavily toward the savings bucket, with our kids putting (at least) half the money they now receive into the bank. Those annual gifts will add up over the years. Your kids could graduate high school with a tidy sum of cash if they have the discipline to save.

4. Teach by example

I remember, one time, I filled up my car at the gas station, got back in the car, and drove away.?My daughter, who was about 8 at the time, accused me of stealing!

She understood the idea that “what’s not ours isn’t ours,” but she didn’t grasp the concept of “plastic money.”?I explained how I paid without going into the store, discussed the concept of a credit card, and emphasized these purchases are?always?paid in full at the end of each month. Today, I still impart the benefits?and?dangers of credit cards.

Was this a lifetime lesson for her? I certainly remember my parents paying their credit card balances off each month.

In addition, consider using lists when shopping. Your children will see that it helps avoid impulse buys. And, as kids grow older and the discussions are age appropriate, explain why you try to avoid impulse purchases.

Use various examples from your life when you teach your kids about the importance of money and savings.

5. Encourage summer and after-school jobs

Trading time for cash via a job helps kids learn the invaluable lesson of hard work. It also supplements savings and provides spending money.

Cutting the grass or the neighbor’s grass, shoveling the snow or the neighbor’s snow (especially on snow days, like today), yard work, a lemonade stand, babysitting, helping in the family business, working retail, household chores, or acting as a lifeguard are options.

Besides the extra cash, kids will learn a strong sense of pride and responsibility that will carry over into adulthood.

6. Open a savings account

There was a time when a savings account earned a respectable interest rate; unfortunately, that’s not the case today. Still, a saving account helps kids learn.

A five-year-old may not need a savings account, but adulthood isn’t far away for a teen or pre-teen. As young adults they will have a checking account, debit card, and eventually a credit card. Baby steps in the right direction will ease the transition.

As they grow older, discuss the benefits of investing with your kids. Outside of a college savings account, you may open an account in their name and teach them about investing. You could start it with seed money and have them contribute on a regular basis. More importantly, help them buy into a savings goal. That way, they will take ownership.

If you’re unsure about how to start the process, we’d be happy to point you in the right direction.

7. There’s an app for that

Today, there are mobile apps that can help kids. Bankaroo, iAllowance, and PiggyBot are just a few. Feel free to look online for one you feel is most appropriate for your child, or check with your bank; many now offer some sort of tool in this area.

8. Guide them with goal setting

Are they trying to save for something? Help them come up with a plan and incentivize with matching funds. Companies do this with retirement savings programs, so why can’t parents??We have done this many times with our kids; whether it was to get the latest gaming system, yet another pair of THE basketball shoes or some other non-essential, big- brand clothing item.?In these cases, we will often tell them we will split the cost with them once they’ve saved their portion

This often leads into the discussion of needs vs wants and the importance of knowing the difference.?A teenager may want a phone, but do they NEED the newest model with the latest, greatest features? Or, can they use an old phone/model that won’t bust the savings account?

9. Money isn’t everything

Yes, it’s important. It gives us choices. But by itself, money can’t buy happiness.

10. Mistakes are part of life

No one is perfect – we all make mistakes; something important for our kids to understand.?Equally important is to learn from those mistakes so as not to repeat them.?As much as we want to shelter our kids from making mistakes, you must allow them the opportunity to do so.?This way, you can help them learn from them and help them develop good habits before they’re on their own, when the consequences are a lot bigger and they’re dealing with larger amounts of money.

Kids that have practical experience with money will learn how to work hard, how to better manage money and how to spend it wisely.

That may be the most important outcome.