Money touches every area of our lives, from our health to our relationships to how we spend our free time. With money comes both freedom and responsibility. Talking to your kids about money is just as important as teaching good habits of nutrition and exercise or how to be a good friend since the lessons learned as youths are likely to impact them well into adulthood.
Here are our top 10 tips to teach your kids about money:
1. Start the conversation early. Even preschoolers can understand that money is used to purchase goods and services that we need, and that we don't have an infinite amount of it.
2. Be honest with them about your values and how money can support them. Whether it's making sure you donate to your place of worship or favorite charitable organization or cutting back on Starbucks lattes to save for a vacation, each family makes money choices that align (or don't) with their values.
3. Be honest with them about your limitations. Many kids think when you run out of money, you just go to the ATM for more. Knowing that there is not an inexhaustible supply of money coming in is an important concept that even adults struggle to fully understand!
4. Go shopping together. A friend of mine told me her son called her from the grocery store during his freshman year in college and said, "Mom! Have you seen the price of cheese!?!?" Obviously, they hadn't gone grocery shopping together in a very long time and he was suffering from serious sticker shock!
5. Set up an allowance, and create a plan for saving, giving, and spending. Whether you use a physical bank or an online tracking system, help your children understand the 10-10-80 rule. Whenever they earn or receive money, the first 10 percent goes directly into a savings bank or account, the next 10 percent is donated and the remaining 80 percent can be used for spending.
6. Help them set goals. My boys really wanted a Nintendo DS but I refused to buy it for them (they still lose socks so I wasn't about to drop $200 on something that small). They decided to save together for one, setting aside birthday money, washing our neighbors' cars for an agreed-upon price, and saving instead of spending their allowance. It took them almost an entire year but they did it, and I think the delayed gratification and the effort makes them appreciate their hand-held toy even more — and they've been VERY careful not to lose it!
7. Don't extend credit. Unless they are asking for something that truly is for a limited time only, don't give your kids an advance on allowance or pay them for chores that are promised but not yet completed. Teaching them how to wait and save instead of racking up debt will serve them well in the long run.
8. Accept that their values will differ from yours. A $4 Spiderman popsicle with gumball eyes from the ice cream truck doesn't seem like a wise financial decision to me, but my boys have happily parted with two weeks' income (allowance) in order to buy one.
9. Let them face the consequences of their choices. My son recently spent the very last of his money on a $3 "invisible ink" pen. It was nearly out of ink before the end of the day, and then he lost it before it even made it home from school. I agreed with him that it was a bummer, but I didn't do anything to try to fix it.
10. Say no. Whether it's because a request doesn't fit within your values or doesn't fit within your budget, learning that life is not about getting everything you want every time you want it is a valuable lesson that truly will last a lifetime.
Need a little help getting the conversation started? Here’s a list of age-appropriate books that you can find at the local library to help you teach your kids how to be money-savvy.
- Financial Peace Junior by Dave Ramsey (ages 3-12)
- Bunny Money by Rosemary Wells (PreK - 1st grade)
- Miss Fox's Class Earns a Field Trip by Eileen Spinelli (Grades 1-3)
- Do I Need It? Or Do I Want It? by Jennifer S. Larson (Grades 1-5)
- If You Made a Million by David Schwartz (Grades 1-5)
- Money Sense for Kids by Hollis Page Harmon (Grades 4-7)
- The Complete Idiot's Guide to Money for Teens (Teens)
- Money and Teens: Savvy Money Skills by Wesley and Darby Karchut (Teens)
Quick links to get you where you want to go:
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