As parents we want our kids to have a better life than we may have had growing up. We also hope that the our good habits might rub off on them to help them grow into successful adults.
One of those good habits to form early is one's relationship with money. Maybe you had a parent that was a saver or maybe they were a spender. I truly believe that how we are raised lays the groundwork for how we handle money. This doesn't mean there isn't the opportunity to develop new habits. We are here to help.
Both my parents were savers, lived below their means, and instilled a sense of hard work in us.
For many parents, the idea of having the "money talk" with their kids is a terrifying thought. One of the biggest reasons parents avoid the topic is they don't believe they know enough about money themselves and fear they will give their children the wrong information.
Although discussing the topic of money with your kids can be uncomfortable, it is a necessary step in their development. I've said in the past, I came out of high school knowing what Sine, Cosine, and Tangent were but, if not for my parents, wouldn't know how to balance a checkbook. Few schools (if any) teach courses on how to handle money the right way. Without learning money management skills at home, your kids are going to be in for a few nasty surprises when they get older.
Are you worried about your children's money habits? Start with the following four tips for teaching financial literacy to your kids.
1. Let Kids Make Mistakes
One effective way to help kids learn how to make budgets is to give them a chance to make mistakes on their own. A small allowance each week is the perfect incentive for children to learn how to budget. Do they want to blow this week's money on candy and a cheap toy or save up a few weeks to get something they really want? Of course, some children will still be impulsive and want to spend their funds right away, but better they learn to make mistakes with $10 than $10,000.
2. Include Children in Household Budgeting
Do you have a shopping or entertainment budget each month? Try including an older child in budget planning for the next month. Kids learn quickly when they have to stay home bored for two weeks because they blew the entertainment fund during the first half of the month (especially, if you hide their phone). Another great idea is to set a grocery budget for an upcoming trip, make your week's list, and then take your child to the grocery store with you. As you place items in your cart, have your child add up the cost of each item until you hit your limit. I remember doing something similar with my dad. He had a Dairy Queen when I was growing up, and the cash register back then only allowed the total to be entered for items purchased, so I would stand there and add up the different items in my head, and give him the total. Counting back the change to the customer was also good practice on understanding numbers.
3. Make a Game of It
Turn budgeting and saving money into a game. Give your shopping lists to your younger kids and let them search online or in the newspaper for coupons and sales. Maybe you could promise to put a percentage of the money they save into a bank account for them to purchase something special down the road. You could even encourage older children to learn lifelong investment skills by participating in a stock trading simulator such as The Stock Market Game.
4. Make Them Earn It
Knowing how to save, invest, and spend money is important, but one of the best things you can do for your children is to instill a good work ethic in them by letting them earn money on their own. Whether your teen works part-time at a local store or you help your little ones start a lemonade stand, the willingness to work hard and be rewarded is one of the best financial lessons you can pass on to them.
These tips are only the start. Use the opportunity of teaching your kids about financial literacy.
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In good health.
All the best.
Rick Fingerman, CFP®
Financial Planning Solutions, LLC (FPS) is a Registered Investment Advisor. Financial Planning Solutions, LLC (FPS) provides this blog for informational and educational purposes only. Nothing in this blog should be considered investment, tax, or legal advice. FPS only renders personalized advice to each client. Information herein includes opinions and source information that is believed to be reliable. However, such information may not be independently verified by FPS. Please see important disclosures link at the bottom of this page.