Let’s talk about money! It’s never too early to talk about finances with your children. When you take your toddlers to the store, they watch you buy groceries (and probably ask for their favorite candy at checkout). Kids are very observant and quickly learn about buying things at the store. Parents also talk about bills and spending at the dinner table, and children pick up on those conversations.
To help your children understand how to make the most of their money, you should start teaching them the basics of money management as early as possible.
When it comes to teaching kids about money, it’s really on parents to show them the ropes. Sit down and chat with them about earning cash, saving smart, and handling a budget. Think of it like giving them a crash course in adulting!
Starting at age three, children should be taught the four basic concepts of money management: you can spend it, save it, invest it, or give it away. There are online tools to help. Excite Credit Union offers several educational tools for financial literacy, including Sammy Rabbit’s Money School, which teaches about saving and creating a basic budget.
When it comes to teaching kids about money, one of the first steps is helping them understand what those coins and bills really mean. A fun way to do that? Let them play store! They can use coins to buy items they like, just like in a real shop. Start with a small allowance to help them appreciate the value of money. A study by T. Rowe Price reveals that 75% of children rely on their parents to teach them about money and approximately 79% of parents give their children an allowance. Children make different choices with their own money than someone else’s.
The Importance of Saving
Money is a tool. Show your kids how to use it! Teach them how to save for what they want and the importance of saving for the future. Talk to them about the importance of saving for college and retirement.
An easy way to start saving is with a piggy bank. Show your children the power of saving by putting aside money for something they want. For example, if they want a new video game, show them how to put money aside until they can buy it. Consider providing an added incentive by matching their savings.
When they are a little older, show them how to set up a savings account that earns compound interest.
More Advanced Financial Lessons
Once your children appreciate the value of money and the basics of saving, they can tackle more complex topics:
- Earning money – Show them how to earn money by making them work for their allowance. Pay them to finish a list of chores around the house. You could put a monetary value on each task, paying a set amount for emptying the trash, mowing the lawn, doing the dishes, etc. You can also give them odd jobs to allow them to earn extra money.
- Smart spending – Show your kids how to spend their money wisely. Younger children ask you to buy things they see at the store, especially at the checkout counter. Teach them about delayed gratification and how to avoid making impulse purchases. Explain that if you buy that candy bar now, you won’t have the money for something they really want later. Also, explain to them about comparison shopping and how to look for the best deal.
- The value of giving – Charitable giving should be part of every child’s financial education. Discuss charities that might interest them and encourage your kids to support them.
- Model good behavior – Parents set an example for their children, so teach them good financial habits by showing them how you manage your money. Show them how to set up a household budget, pay the bills, and save money for retirement.
If you need help teaching financial lessons, Excite has partnered with Banzai to give you tools to help you dive into financial topics. Banzai has lessons on budgeting, building credit, creating an emergency fund, a budget calculator, debt management, and other topics you can share with your children.
Don’t wait to start teaching your children the basics of personal money management. The financial lessons you share with your kids will last them a lifetime.
