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Saving, Spending, and Credit: Teaching Your Kids About Money

Category: Financial News

Everyone knows that kids are expensive, and you expect that they’ll be so when you assume the role of parenthood. While there are certainly some expenses that you just won’t be able to avoid throughout parenthood, there is some financial payoff to teaching your children about dealing with finances themselves.

Starting to teach your kids about personal finance from a young age—ideally as soon as they can start doing simple math—is the easiest way to teach them money saving and spending skills. However, it’s never too late to start teaching your kids about money. Even if they’re in their teens it’s not too late!

Here are some tips to help your kid learn valuable money-saving skills that they’ll need when they move out of the house and some that will also save you some money while they’re still around.

When should I start teaching my child about money?

Children learn in their kindergarten and elementary school math classes about counting, adding, and subtracting money. This is a great opportunity for you to jump in and add to their lessons by teaching them about saving.

While you’re helping your daughter or son with their homework bring in some real-world examples. Are they doing math problems that involve money? Break out some bills and make the problem tangible. Show them in real life how money can add up if you save carefully, and how it can subtract if you don’t save wisely.

Buy your child a piggy bank and let them count how much they have saved every couple of weeks. Again, by bringing in tangible evidence of savings your child will be able to see how money can accumulate over time way before they ever get their first job.

But what if my child is older?

Like I said earlier, it’s never too late to start teaching your child about money as long as they’re still living in your house. For kids that are old enough to start doing household chores around the house, you can give them incentive to do said chores by offering them an allowance. Giving your child a small allowance will give her the opportunity to learn how to save and budget in order to buy the things that she wants on her own.

The key to this lesson working successfully is to not buy your child the thing that they are saving toward. If you know that your son is saving up to buy a snowboard and you go ahead and buy it for him for his birthday your money lesson will have failed, he’ll never feel the pride of having saved up money for months and buying something for himself.

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If your child is old enough to get a job, encourage them to go for it! Then stop buying them things that they don’t absolutely need to survive. When I was sixteen and got my first job I stopped relying on my parents for everything but food and somewhere to live. I learned how to budget money to buy the clothes that I wanted and to do things with my friends in my free time. Sure, my parents were teaching me a lesson about money and budgeting when they cut me off, but I felt a lot more independent and happier when I was spending my own money to buy the things that I wanted anyway. It’s a win-win situation.

Teach your children the value of money

Before your child gets their first part time job it will be hard for them to imagine how much work is actually put into making money. After all, they only see you disappear for several hours a day and you’re known as the person with the money. They might have trouble putting together the fact that you are working for money while you are away, and they certainly have no idea how much work goes into the money that you bring home.

The best way to teach your child about how hard-earned money actually is can be done by paying them their allowance by the amount of time that they put in to doing certain chores. For example, you could pay them $3 for a half hour of dishwashing. If they do a more difficult chore, like shoveling snow, you could pay them a little more. This way they’ll learn that hard work has a bigger payoff, while simultaneously learning about how much work they have to put in to get that payoff in the first place.

Teach your kids about credit

If you’re feeling brave and have a teenager in the house, you could start teaching them lessons about credit. Many things that teenagers want to buy—like computers, televisions, spring break trips—cost more money than they can probably make on their own as a high school student. So, you can lend your child the money that they need to make these purchases and agree on a fair interest rate. Then, your child could pay off their debt over the following months. This is a great way to teach your teenager about debt before they head off to college and it’s too late—you don’ want them to learn their first hard lessons about going into debt with a real credit card!

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Teaching your kids about money, saving, and spending is one of the best gifts that you can give them as a parent. Whether you’re starting young and looking into ways to teach your toddler about saving money in their piggy bank or teaching your teenager not to go into debt, your child’s youth is full of teaching moments about saving money!

How do you teach your kids about saving money?
Let us know in the comments!

 

By Louie Andre

B2B & SaaS market analyst and senior writer for FinancesOnline. He is most interested in project management solutions, believing all businesses are a work in progress. No stranger to small business hiccups and drama, having been involved in a few internet startups. Prior to his for-profit ventures, he has had managed corporate communications for a Kansas City-based Children International unit.

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1 Comments »
Carol says:

This is a good idea to have them to learn about money and saving with their math studies they have already.

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