How To Teach Your Kids About Money
If you’re like most parents, you have a never-ending list of things you want to teach your child so they grow up to be a successful adult who contributes to society. From a young age, you model and instruct them in how to share, what respect looks like, and how to handle responsibility. As a society, we are excelling in some areas of parenting, but falling behind in others.
Most parents agree that we need to do a better job teaching our kids about money. Last year, T Rowe Price reported that 80% of parents didn’t think schools were doing enough to teach kids about financial matters. (1) However, raising children and teaching them to navigate the world is first and foremost a parent’s responsibility, and it’s easier to start when they’re young than try to catch-up when they are teenagers.
Make Money A Comfortable Conversation
Starting when the kids are young but old enough to understand, try to make money a regular part of family conversation. Growing up in a family where money doesn’t have a stigma means that talking about money will never be uncomfortable. Talking about the cost of bills, budgeting for groceries, planning for vacation, and saving for retirement are all normal parts of life as an adult. Allowing children to overhear and even be involved in these conversations (age-appropriately, of course) goes a long way in helping them become financially savvy adults. A child that helps plan a grocery trip to stay in budget learns important life skills and gains comfort in dealing with money.
Give Kids An Allowance Tied To Responsibilities
Teaching children that the work they do results in payment is an important lesson. Children who are given pay-incentivized chores will learn that the harder they work, the more pay they’ll receive to reach their financial goals, even if those goals are for a coveted toy. Having some of their own money gives children the value of a dollar, which ties to hard work. They’re much less likely to spend their money frivolously when they realize that a bag of candy is worth a half hour of mowing the grass.
Teach Older Children About Compound Interest
Need an idea for a boring yet important gift? Give your teenager a copy of the paperwork showing that you, as parents, have opened an Individual Retirement Account for him or her. There’s no doubt your child would prefer cash, but the gift of a savings account comes with a lesson in compound interest and saving for the future. Kids are generally focused on the here and now and it’s hard to get them to plan for next year, much less saving for long-term goals like retirement. Having regular conversations about the importance of planning and saving will get them comfortable with the concepts. Help your kids along by opening savings and investment accounts for them, showing them that investing at a young age puts the power of compound interest in their hands, giving them a major advantage come retirement age.
Monkey See, Monkey Do
Kids want to be just like their parents, so set a good example about money. Set a good example by talking with them about why you made a financial decision, whether it was a good one or a bad one. Show them how to do things like:
- Write a check
- Balance a checkbook
- Create a budget
- Shop sales
- Use coupons
- Set money aside in a savings account
- Invest in stocks
- Pay taxes
Allow your kids to be age-appropriately involved in these transactions, and they’ll gain money confidence that will motivate them to charge into adulthood with confidence.
Here at The Rosamond Financial Group, we believe that every child can learn critical financial lessons at a young age that will set them up for future success. We want to provide you with the tools to help you on this journey. Together we can make sure that this next generation enters adulthood with the knowledge necessary to build a secure financial foundation for their bright futures. Please call my office at 830-798-9400 or email email@example.com.
Preston Rosamond is a financial advisor and the founder of The Rosamond Financial Group Wealth Management, LLC with nearly two decades of industry experience. He provides comprehensive wealth management and financial services to individuals, professionals, and families who enjoy simplicity and seek a professional to help them pursue their goals. Preston personally serves his clients with an individual touch and a sincere heart, and his servant’s attitude is evident from the moment you meet him. Learn more about Preston or start the conversation about your finances with him by emailing firstname.lastname@example.org.