Teaching Your Kids About Money
We all want the best for our kids. We do our utmost to provide for them, teach them right from wrong, and raise them to be upstanding citizens of the world. But one major gap in our parenting can be forgetting the importance of teaching our kids about money. There are many ways to start the conversation early, setting them up for financial success in the long run.
The first step is to talk about money. Children are aware of the goods and services that surround them, but take the time to explain how we come to have them. At the grocery store, take a moment to walk your child through how you are comparing the prices of food and why you’re picking one brand over another. Perhaps they don’t understand why you would pick a generic brand over a brand they saw advertised, which can start a conversation about value.
Once your child has a fundamental understanding of how money is used, you can try different activities that will let him or her put their knowledge into action. Letting your kids shop is a great way to teach them to spend wisely. If they’ve been asking for a new toy or video game, you can allow them to order it online under your supervision. Help them find the best deal on the product —taking into account the shipping fees and taxes—then let them enter your credit card information, giving you the chance to tell them what a credit card is and how it works to buy things. This early exposure can help your child grow into a smart shopper.
Once the product arrives in the mail, save the receipts and review their purchase with them. Ask questions about their enjoyment; do they feel it was worth the money you spent? Would they choose something less expensive next time? Would they have waited longer to save for a more expensive product?
The next step is to allow them to save and spend their own money. Consider forgoing a conventional allowance and instead pay them for household tasks. This teaches the importance of earning from a job and can instill a good work ethic. Give them a couple of clear jars to store their cash, labeled “Spend” and “Save,” and let them decide what percentage of their earnings they want to put in each (clear jars are a good visual aid). You can even help them create a simple budget to track their spending and saving goals.
Regardless of their age, opening a savings and retirement account for your child is never a bad idea. If they're old enough, take them to the bank with you and involve them in the process as much as possible. Compound interest may go over their heads for now, but checking in on how their accounts are growing over the years can encourage them to keep saving and investing in the long term.
There are countless ways to start teaching your little ones about the importance of money, but it’s not how you do it, it’s that you do it. An understanding of money in their early years will help them grow into adults that spend and save wisely, and have a greater chance of financial health for years to come.
Our team of professionals at Madison Monroe & Associates is here to help you make the best decisions for you and your family’s financial future. Please contact us for assistance by emailing us at firstname.lastname@example.org or calling us at (877) 346-2797.