For most of us, we get our personal finance habits from our parents. If they were good with money, we tend to grow up and be good with money as well. But if we had parents that weren’t great with money, chances are we grew up with poor money habits as well. This is the main reason why personal finance needs to be taught in school. Too few parents realize how large of an impact they have on their child’s financial literacy. Because of this, I am here to help. This post is all about teaching kids good money habits.
4 Tips For Teaching Kids Good Money Habits
#1. Be Real With Them
Growing up, I had complete chores as did my sisters. We also earned an allowance. But the chores we did – like washing dishes, taking out the trash, making our beds, etc. were never tied to our allowance. This is a good thing.
The reason for this is because our chores weren’t something that we did just when we needed money. They were things that needed to be done to keep the house running smoothly.
So, if you give your kids an allowance, don’t base it on the chores they do around the house. Make the chores mandatory regardless of an allowance. You don’t want to blur the lines between doing things for money versus doing things because they need to be done, regardless of money.
#2. Offer Them Bonuses
When teaching kids good money habits, you want to offer them bonuses. What types of bonuses? These are when they seek out additional work. For me, I learned at an early age that if I do other things around the house, like rake the leaves in the fall or organize the garage, I could earn additional money.
While I didn’t realize it at the time, it instilled in me a connection between work and pay. I knew that if I wanted to earn some money, I had to work for it. I couldn’t just go up to my parents and ask for money. Of course, I did just ask many times and I got denied 99% of the time.
Don’t confuse this though with just doing an extra chore. If I emptied the trashcans even though I wasn’t supposed to, I didn’t earn a bonus. The bonuses were earned when I did something above and beyond what was expected of me. So doing extra dishes wasn’t worth a bonus but doing yard work was.
#3. Turn It Into A Budget Exercise
Budgeting is something most people are horrible with. You can make sure your kids are decent at it by having them manage a budget. This works for both younger children and teenagers.
For younger kids, find out what they want to buy and work with them to create a budget based on their allowance and the cost of the item. How long will it take them to save up for it? Is it worth the effort? These questions will help them think critically about money and help them think before buying.
For teenagers, you can use real-life situations. A good example of this is paying for the gas in the car or even paying their cell phone bill each month. If they spend their money too quickly and can’t fill up the tank, and thus are stuck at home, they will learn to be smarter with their money going forward.
#4. Teach Savings
Most of us are bad at saving money. We need to teach our kids that saving money is not only important but can also be fun. To teach your kids to save, you can do what my parents did and force it upon us.
While this might not work for all kids, it worked for us. I remember going to the bank on Friday nights and depositing $0.50 or $1 in my savings account. I would then fill out my register and do the math. Seeing I had more money every week encouraged me to save more. And the fact I was earning interest blew my mind!