The family that saves together âŚ
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The list of things you have to teach your kids never seems to endâfrom how to say âpleaseâ to memorizing multiplication tables and so much more. On top of all that, thereâs money. Spending it, saving it, giving itâoh, and earning it! Where do you even begin?
To make your job easier, weâve boiled down some finance fundamentals into five key habits that every kid can use (and maybe some adults, too). Think of this as a solid money foundation for your childâand maybe a reset for you, if you need one.
Key Points
- Talk openly about moneyâwhat things cost, what long-term goals you have, and mistakes youâve made.
- Let children make their own money mistakes (within reason) and learn from them.
- Charity begins at home, and should begin at a young age.
Habit #1: Talk about money.
As we all know, money can get stuck in a cone of silence. But your child will have an easier time investing their 401(k) down the road if they can talk about the price of pizza now. By having frequent, low-key conversations with your kid about day-to-day money issues, youâll build the kind of fluency that will benefit them their whole lives.
Of course, youâll want to spare your youngster unwanted money stress. They donât need to know about your surprise tax bill, that parking ticket, or high medical costs. Stay within your childâs world and comfort zone. Some suggestions:
- Talk about the price of groceries. Why do you buy item (or brand) X instead of Y or Z? Note that economizing has its place, as does spending more (sometimes) to get better quality.
- Share your goals. If your family plans to take a trip, build a deck, or buy a new car, talk about the financial decisionsâand sacrificesâthat play into it.
- Celebrate success, admit mistakes, and avoid shame or judgment. Money management is a series of choices. When you highlight different decisions and lessons learned, you give your child a sense of resilience.
Habit #2: Let your child manage their own money.
However your child gets their pocket money (an allowance, doing chores, etc.), the important thing is to let them manage itâor at least a decent portion of it. Thatâs a tough one for many parents, and you may need to interfere at times. But sometimes you have to let them blow Grandmaâs birthday check on candy, a must-have toy they never play with, or that 40th stuffed animal. Let them learn the hard way that, once you spend it, itâs gone.
That doesnât mean you take a 100% hands-off approach. Not at all. Rather, letting your kid make their own money decisions is a good opportunity to instill basic guardrails around saving and spending and emphasize the tricky dance between impulse and consequence.
Habit #3: Show that earning money is fun and rewarding.
One argument in favor of letting your child earn an allowance (by doing chores or other tasks) is that itâs a proxy for how the world really works. You do X, you earn Y. Although thereâs some debate about the best way to provide an allowance, and your family may have other systems, helping your child make earning a habit is crucial. Some suggestions:
- A tiered allowance. You provide a base amount for each child, with extra payouts for extra work. Be sure to specify which chores are worth what amounts.
- Outside work. Once your child is in middle school, encourage them to do work for neighborsâfeeding animals, doing errands, helping younger kids with homework.
- Garage sales. Once your child is old enough to part with certain books or toys, encourage them to sell lightly used items on your stoop or from the driveway.
Be sure to get your kidâs input on what theyâd like to earn and how. Also, these days, it doesnât need to be a manual, cash-only tracking process. Apps* such as Greenlight, FamZoo, and Rooster Money can help you streamline your money tracking, and also aid in the teaching process.
Habit #4: Save steadily, spend wisely.
Saving and spending are two sides of the same coin, and thatâs the lesson to emphasize with your child. If you âbegin with the end in mind,â your child will understand that saving isnât arbitrary. Itâs fun! Youâre saving money nowâso you can spend it later on something important you want.
Compounding: Interest on your interest; returns on your investment returns.
EncyclopĂŚdia Britannica, Inc.
Whether your child uses a combination debit/savings card or you have a custodial bank account for themâor if they have an old-fashioned, analog piggy bank for cashâmake sure they set aside a certain amount from each deposit, perhaps 10% or 20%. That way, $10 earned for feeding the neighborâs kitties generates either $1 or $2 in savings. A $25 holiday check provides $2.50 or $5 in savings.
When itâs age appropriate, show your child how to use automatic transfers between accounts so they save steadily. Help them chart their progress and celebrate the milestones, even if itâs just buying another video game. Nudge, donât judge. Todayâs video game could be a home or a car someday, if they master the habits now.
Habit #5: Give from the heart.
If your family has an established giving habit, thatâs an easy way for you and your kids to start talking about the causes and charities they care about. And if you donât, there are any number of groups in your community that likely need a little help. The closer to home, the easier it is to show your child where their dollars will go. And if you and your child choose an organization that matches their interests, the act of giving will be even more rewarding.
As with any habit, try to be consistent. So, if you start by giving to a local animal shelter or arts group, help your child decide how often to donate and how much they feel comfortable giving. Start small so they enjoy the act of doing good, rather than feeling any strain.
Raising money-smart kids doesnât have to be overwhelming. If you take your time and break down financial lessons into easy habits for your kids, money basics can be fun, engaging, and rewarding. And you donât have to be the perfect role model. If youâre willing to share some of your past money mistakes, perhaps your child wonât need to learn everything the hard way.
For many parents, these kitchen-table teaching moments are a great reminder that the learning never stops. We all need good money habits, no matter how old we get.
*Note: Examples used in this article are for educational purposes only and are not an endorsement of any of the companies mentioned.
This article was most recently revised and updated by MP DunleaveyThis article was most recently revised and updated by Nancy Ashburn
