Make it fun and make sure to reach these important milestones.
Your job as a parent is to prepare your children for success as they move into adulthood. And if you don’t teach your children good financial habits, you aren’t doing that job completely. As a result, your kids can struggle with debt, have bad credit, and even encounter problems getting out on their own without a constant need for support from you.
The information below can help you understand how to teach your kids about finance. And remember, the best way to show your kids good financial habits is to be a good example. If you need help, call us or complete an online debt help request form to connect with the experts and services you need to get ahead.
Tip No. 1: Make sure it’s fun
Kids don’t learn when things are boring, so the more you can make it fun the more likely your children will be to actually digest and take those lessons with them. So make things fun…
- Go online to find basic money lessons and budgeting games. You can also find video games and game apps that teach finance, too.
- Incentivize things by showing them that things like savings lead to fun things they want. You can also add rewards for them doing tasks or reaching goals, such as giving them a bonus if they save 10% of their allowance for the year.
- Let them watch you – and answer every “why” to the best of your ability. You might be surprised, but things you think are pretty boring or standard like paying a bill online or filing your taxes, your kids will find fascinating because it’s something they’ve never seen before. If they ask something you don’t know, make a commitment to find the answer together.
Tip No. 2: Hit these money milestones
You don’t want to try to teach things that are way over your kids’ heads, so you need to start small when they’re young and continue to expand. The following milestones can be helpful:
- Age 2-5. Before the age of 2, kids may learn to count by mimicking what you do, but they won’t really understand how counting applies to objects. So after 2 once your kids really start to understand counting and basic math like addition and subtraction, you should start teaching them about money, too. You also need to instill vital lessons like that things they want cost money.
- Age 6-10. This where you really want to expose your children to finance. Teach them about banks and help them set up a savings account. Start with things like allowance and let them watch you do things like paying bills and looking at your budget. Kids are still very monkey-see monkey-do at this age, so if they see you save every time you get paid, they’re more likely to do the same thing. Things like bonds as holiday gifts can even teach them about long-term savings. Play games that teach financial lessons, since they’re more open at this age to learning.
- Age 11-14. Pre-teens and “tweens” should continue lessons from childhood and expand basic financial values like working for what you earn and giving back. Games probably won’t work as well, but you can still motivate them with incentives. As they have more wants and more ways of getting income, such as chores or a babysitting job, then they can create their own budget. If they get a phone, they should learn things like chipping in for bills. Credit can be introduced, but really it’s too early to get them credit cards.
- Age 15-18. As kids start to think about college, talk to them about the cost. Keeping what you’ll pay for their tuition a secret isn’t helping them or your budget. So talk about the cost of college, let them see any college savings you have for them, such as a 529 College Savings Plan, and start discussing how things like student loans work. This can help them make the right decisions about where they want to go to school and what they want to do. You can also introduce credit, but keep a close eye on the bills and have them chip in if they’re making charges. You should also introduce filing tax returns and teach them the basics.
Tip No. 3: Finance shouldn’t be secretive
Hiding your own financial struggles and issues from your children isn’t doing them any favors. Kids can’t learn the value of a dollar if you always give in to the constant string of, “Buy me. Buy me.”
The more open you are with your own financial outlook, the more your children will understand how money and finance really work when they get out on their own. For instance, if you never show your kids how you file your taxes, how are they supposed to know what to do the first time they file on their own? They can go to a tax preparation service, but if they don’t understand anything at all, they’re open to scams and problems with the IRS if the service doesn’t file for them correctly.
So make sure to be open with your children so they can learn the important lessons they need to know. Let them see how you have to save up for a vacation. If you have teens, let them sit in on the negotiation and loan approval process for buying a vehicle.
Tip No. 4: Don’t let your kids turn into moochers
Let’s be honest – kids may be greedy by nature, but they usually don’t start out being spoiled moochers unless the parents allow them to grow into that kind of behavior. This doesn’t mean you shouldn’t support your kids and help them get where they need to be, you just need to walk on the right side of the fine line between being supportive and being a sucker.
Fact: The average cost to raise a child to 18 is roughly $250,000… even without supporting a moocher.
Here are some tips to help you avoid this common problem:
- Stick to allowance and incentives instead of just buying them whatever they need.
- Set limits on gift giving at birthdays and holidays.
- If they get into trouble with a bill, like on a cell phone or a credit card, they should have to do the work required to pay back the penalties.
- If your kids move back in after finishing school, they should have to contribute.
- Set expectations for ongoing support you provide, such as when you expect them to take over their own car insurance or bills.