The 5 Things to Start Teaching Your Kids About Money
The 5 Things to Start Teaching Your Kids About Money
Money is a tool. Money is a trap. Money is a means to get things. Money can be spent at any time. Everyone has different thoughts about money, and having a poor money philosophy can land you in loads of trouble if you aren’t careful.
Teaching your children about finances is such an important part of your role as a parent. And it shouldn’t start when they turn 18 years old or head off to college! Principles for managing finances can start being taught when your kids are very young.
The way your children handle money will either set them up to have a good life financially or it could be what holds them back. Credit card debt, school loans, home mortgages, and saving for retirement are all areas they will have to navigate in their life.
If you haven’t taken the time to teach them principles like creating a budget and developing a plan for the future, they will likely fall into one or more financial pitfalls.
To help you know where to start, here’s a list of five things you should consider teaching your kids about money:
1)Help your kids set financial goals and reach them.
Do they want a new toy, video game, or piece of clothing? Why not use that as an opportunity to teach your kids how to reach a financial goal? You may choose to let your kids earn their allowance rather than just give it to them. When you walk them through creating a goal, take the time to sit down and help them see how long they will need to save to be able to buy the item.
If it makes sense for your family, this is a great time to explain how they can reach financial goals faster. Maybe if they do extra chores, they can earn more money. Or if they can commit to stop other spending, they’ll reach the goal sooner. Let your child choose which method they want to take to reach their goal, and help them stick with it.
2)Make sure your kids know the difference between something they “need” and something they “want.”
In today’s culture, we don’t often differentiate between needs and wants, and people follow their impulses to decide what to spend their money on. Commercials, ads, and stores are designed to make us want to spend money. Helping your kids differentiate between a “need” and a “want” will help them avoid making purchases on a whim.
It’s important to teach your children healthy ways they can make unexpected purchases. Help them save a certain amount for “fun” purchases. If they want to make a purchase that would prevent them from reaching a goal, gently help them see that they are slowing down their ability to reach that goal. You don’t have to prevent them from choosing the impulse buy, but instead use it as a learning opportunity.
3)Guide them in setting up a budget.
The beauty of teaching your kids when they are young is that the budget can be fairly simple. Help them develop a goal they are trying to reach, an “expense” of some kind, and be sure to incorporate charitable giving. This will help your child understand how to prioritize covering your expenses first and then saving to reach a goal.
If your children are a little older, take the time to help them understand credit cards and loans. Teach them how they can be helpful, but also be clear about the potential danger debt can have.
4)Get your kids set-up for the future.
Compounding interest is a powerful tool. (We break it down in this Instagram post.) If your children started saving $500 a year ($42 a month) for 65 years, they would have around $1 million due to the compounding interest. Teaching your kids the importance of saving for their future now will start them out on the right foot financially.
5)Make sure your kids see you managing your finances well.
Your kids will learn the most about finances by watching you. (Just a little bit of pressure, right?) That means you should be intentional about letting them see you practice what you preach. Do your kids regularly see you spend without care? Do they hear you explain how you aren’t going to get a coffee today because you are trying to reach a financial goal? If you have a spouse, do they see you planning your finances together? Letting your kids see you model good money management skills instills these principles on a much deeper level.
This is just a short list of ways you can start talking to your kids about finances. With money being widely digital, it can be a hard concept to grasp for younger children. You may want to consider using cash for a period of time to help them understand it better.
If you are struggling yourself to come up with a financial plan, remember there is no better time than right now! It may be time to get some help by scheduling a complimentary meeting with our team here at 210 Financial or by giving us a call at 309.263.1333!
The “210” in our name stands for a childhood home that represented safety, love, and family. That is what we want to provide for everyone that we care for. Hear more of our story.
This content is provided for informational purposes only. 210 Financial is an independent financial services firm that utilizes a variety of investment and insurance products. Investment advisory services offered only by duly registered individuals through AE Wealth Management, LLC (AEWM). AEWM and 210 Financial are not affiliated companies. 1201535 – 1/22
Content prepared by Savage Content Collective
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