There are a lot of good reasons to teach your kids about money. For one, you don’t want your children to repeat your own personal financial mistakes. Also, if you raise financially savvy adults, chances are they won’t someday be asking you for money. By helping them, you’re helping yourself.
Whatever your motivations, it can be a challenge to figure out how to impart your hard-earned financial wisdom. Keep reading for some tips on how to do it, then choose your method.
How to Teach Your Kids About Money
There are many approaches to teaching a child about money. Some parents believe in allowances, but believe elementary-age kids don’t need a debit card just yet.
What matters, of course, is what you think. But here a few suggestions:
Talk to your kids about money. Mitchell Kraus, certified financial planner and founder of Capital Intelligence Associates in Santa Monica, California, echoes what many experts say: “The best way parents can teach their children good financial habits is by discussing the money decisions that they make.”
Kraus says you should at least discuss your thoughts on spending and saving with your kids.
“Most Americans have a choice on how to spend their money,” he says. “Some choose nicer cars and houses. Some choose experiences. Going over the choices with your children helps them understand your values — and that life is full of choices.”
Consider an allowance. There are good arguments for not giving your child an allowance. Some experts say children shouldn’t get paid for doing expected chores around the house.
But as Kraus points out, “Giving a child a small allowance also helps them learn about making choices with their money.”
Continue discussing finances with your child and eventual teenager. Don’t make it a one-and-done conversation.
“Where most parents stop short is following up with the children on how well those choices turned out and what choices they might want to make in the future,” Kraus says.
Across cultures, there are stories about great wealth being lost in three generations. The first generation works hard and lives on a tight budget to create the wealth, he says.
The second generation sees the hard work and sacrifice and understands that choices need to be made about money. The third generation has never heard a fight at the dinner table about money and tends to blow everything, not understanding its value, he adds.
Get your child involved in charitable giving. This could be done through a place of worship or a community center, whether it’s raising money for a good cause or volunteering your time. .
“Engaging your children in thoughtful philanthropy is a hands-on way to share your family’s values and teach your children about saving and giving back to their community,” says Ross Cohen, a CFP and wealth advisor at Ritholtz Wealth Management in Chicago.
Consider earning money a competition. If you have more than one child, you could turn money-making into a contest.
“That always brings out the competitive nature of the kids. Whichever child saves the most gets the biggest special treat or bonus,” says Lamar Brabham, CEO of Noel Taylor Agency, a financial services firm in North Myrtle Beach, South Carolina.
Finance can be intimidating, even for adults.
“Words like boring, confusing, complicated and scary are common when hearing someone describe money matters. You can imagine what children think of it,” he says.
It will help if can bring some fun into the conversation, Brabham says.
[How to Talk About Money With Family — And Why It’s Important]
Ideas for Your Kids to Earn Money Right Away
Another way for kids to learn about money is by earning it. Depending on the age of your child, you may need to assist with some of these ideas.
— Babysitting
— Doing yard work for a neighbor
— House and/or pet sitting for vacationing neighbors
— Selling crafts on a website, such as Etsy
— Organizing a yard or garage sale
— Shoveling driveways for neighbors in the winter
— Doing extra chores for money
— Washing neighbors’ cars
— Collecting recyclables
— Tutoring
[How to Save Money for Your Kids]
Ideas for Teaching Your Kid About Money by Age Group
The earlier you teach your kids about money, the better, many experts say.
“Like physical exercise, financial exercise can become a habit that changes their life forever. Don’t wait. Start today. Your kids will thank you when they get older,” Brabham says.
That said, you’re going to teach a 5-year-old about money differently from how you would a 15-year-old. Here are some ideas:
For younger kids. Even a 3-year-old doesn’t have to be oblivious about money.
Melanie Hopkins, founder of Finance Friend, a financial consulting firm in Brooklyn, New York, has a good idea for parents of children as young as two.
“When they get a treat at the bakery or a toy at the toy store, let them hand the cash or credit card to the cashier,” Hopkins says. “That helps them to understand that money is transactional, which is a core concept that you can build on as they get older.”
You could also let your kids handle play money — and have them “pay you” in exchange to get various things throughout the day. They could play store or house with an actual budget.
Kris Jerke, president of Ascend Financial in Sioux Falls, South Dakota, likes the idea of using jelly beans as cash. You give your kids 30 jellybeans (or an amount you think sounds about right), and they can “spend” them throughout the day.
“You can determine what other things you want to charge for special treats or use of some favorite toys,” Jerke says.
For elementary school kids. Board games are a fun way to impart financial lessons. “As funny as it sounds, Monopoly is a great game to play with children to begin (teaching) the concepts of money,” says Aaron Leak, founder of ECL Private Wealth Management in Rockford, Illinois.
He says older elementary school kids can handle more complicated financial transactions, like perhaps using a debit card, as long as you’re leading the way and monitoring their finances.
“The earlier kids understand money the better,” Leak says.
He says that his daughter, had her first debit card at age 12. By 13, she had her own investment account. You’d expect that from someone who owns a wealth management firm, of course, but the point is — you can probably get your kids involved with money matters far earlier than you might think.
For teenagers. Leak is enthusiastic about teenagers learning about investing. And at some point, if you think your teen should get a part-time job, that’s not a bad idea, many financial experts say.
“As a young teenager, you can babysit, mow lawns or referee sports. As they get older, there are opportunities to work in retail or hospitality,” Cohen says.
[READ: How to Make Money as a Teen]
Should Your Child Have a Credit Card?
That’s up to you, of course, but Craig Everett, an assistant professor of finance at Pepperdine Graziadio Business School, doesn’t think your college student should have a credit card.
“I do not recommend credit cards for anyone under 25. The frontal lobe, which allows people to connect current actions with long-term consequences, does not fully develop until the mid-20s,” Everett says.
“Credit cards allow current spending that may have significant negative future impacts, so incomplete brain development can have disastrous financial consequences for these people who are just starting their adult life,” he adds.
He recommends parents encourage their adult children to use debit cards exclusively until age 25. Everett admits that your adult kids are unlikely to follow your advice, but “it can’t hurt to try,” he says.
But Everett isn’t crazy about the idea of young children, particularly those under age 8, having debit cards.
“In my experience, debit cards are not very useful in teaching young children about money because the card is only an abstraction and looks the same regardless of how much money is in the account. Using physical cash is much more effective in teaching kids about the value of money,” he says.
“For kids under 8 years of age, coins are the most effective because of the differences in size and weight. Young children really enjoy activities of counting and exchanging coins,” he adds.
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10 Ways to Teach Your Kids About Money, According to Financial Experts originally appeared on usnews.com
Update 09/20/24: This story was published at an earlier date and has been updated with new information.
