We’re ending Financial Literacy Month with a piece about how to teach your kids about money.
What could be more important than teaching your children valuable lessons? Now, money isn’t everything (more on that later), but it has utility.
Your kids need to know how to use it effectively, as well as how to save for the future.
Use a clear jar to save
Do you know what you see when you use a clear jar? Everything!
If you teach your kids to put their money in a clear jar, they can physically see everything that they put in there. After several weeks or months, depending on how diligently they save, they’ll be able to see the accumulation.
Hopefully, seeing their own money pile up will motivate them to continue that habit of saving.
Set an example
It’s no secret that kids learn most by watching their parents, so you should be doing everything (not just in a financial aspect) to improve every area of your life.
When you are working on your finances, show them what you are doing. Make sure they see you put money in your savings account or put change into the change jar.
Do you keep a budget? If you don’t it’s time to start one. Show them what you pay for things, how you break down those costs, and what you do with the money you left over.
Depending on their age, it might be beneficial to teach them the tool of automating and why it makes sense to do it.
All in all, if you have a vision for the morals and lessons you’d like to instill in your kids, live them.
Show them things cost money
When you take your kids shopping, show them how much things cost. Teach them that it makes sense to pay for some things at a certain price and for other things it doesn’t.
For example, my son is very young still and he is going to grow like a weed until, if not up through, high school.
Granted, we aren’t going to buy everything at a rummage or a thrift store, but we certainly aren’t going to buy everything brand new either.
He’ll grow out of his clothes in a few months and then he’ll need a new wardrobe. An easy example, but hopefully it got the point across.
Reward them for doing chores
You shouldn’t just give your kids an allowance, just because. They should have to earn it.
They need to learn the value of hard work and laboring for what they take home.
Giving your child an allowance for doing nothing could teach them that they don’t have to work for what they want and that people will just give them things.
What may be more valuable than teaching them to earn their keep is helping them learn that not everyone is dealt the same hand, and some people have it much harder than others.
By giving time and money, you should teach your kids that it’s important to give back and aid those that are less fortunate.
It’ll make the people they help to feel good and it’ll make them feel good for doing a good deed. What’s more, it’ll teach them that life is about being there for your fellow human, not money.
Teach them compound interest
Compound interest is so magical, it should have its own show in Vegas.
Jokes aside, it’s vitally important that your children learn the value of compound interest. It’s difficult to teach them this with the abysmal interest that savings accounts earn, though they’re getting better.
The best solution that I’ve come up with is matching their savings. This can get costly, however, so it might be a good idea to set a cap right away.
The lesson is that saving money, putting it to work, and leaving it alone for an extended period of time, allows you to earn much more than from purely saving.
Warn them about credit cards
If used correctly and efficiently, credit cards can be a wonderful financial tool. You can earn rewards and boost your credit score.
However, most people who use a credit card don’t do it to be strategic with their finances. They use them because they can’t afford something with the money in their bank account.
Obviously, there are outliers, like people who lost a job and have run out of funds. They have limited options.
The lesson is to spend what you have and not a cent more. An added lesson, pay your balance in full right away. This prevents you from having to pay interest.
Teach them to create goals
If they don’t have anything concrete to work towards, what’s going to give them the motivation to save?
Goals in every facet of life are important. If you want to take a vacation, set a dollar amount, and work for it. If your daughter wants to buy a toy, tell her how much it costs, then she’ll have something to save for.
Another thing I would teach, though it might happen on its own and honestly, I’m not sure it can be taught, but I’d try to teach making saving a habit.
When it comes to personal finances, I wholeheartedly believe developing a habit of saving is the most important thing you can do for your finances.
Include them in decisions
When you are discerning if you want a certain brand over a different one, or are trying to figure out if you should buy a certain item in bulk, then let them hear your decision making progress.
Whatever conversation you are having with yourself to make that decision, do it out loud so they can hear you.
Once you’ve ultimately made a decision, talk to them about it so they understand that buying something shouldn’t be a snap decision.
You’ve worked hard for your money so you should spend it wisely and on things that matter. Your kids need to learn that.
Teaching your kids the importance of being financial literate is paramount. Again, money is not the end all, be all, but being able to use it to your advantage can have a positive impact on your life.
I touched on this in the beginning, but whatever important lessons and morals you’d like to pass onto your kids, make sure you are living it. They learn by example, so be their example.