Children whose parents don’t teach them about handling money, may grow up to be adults who don’t know how to handle their finances. Start when they’re young, but keep it simple. Take your child to the grocery store and plan to pay with cash. Tell them that you have a certain amount of money to buy food today, and when that money has been used up, you have to stop shopping. When you see something is on sale, explain that you can buy something else with the extra money you’ve saved. Make it a game, looking for sale tags. Encourage them to earn money by doing chores around the house, and saving their money in a clear container makes it easy to see their savings grow.
When your kids are in elementary and middle school, you can introduce more complicated financial details. Explain how you earn your paycheck, and which items in your household expenses that paycheck covers. Explain to them that when you get a loan to buy a car or a house, you have to pay that money back, each month for a period of time. Explain the difference between credit cards and debit cards. Make sure they understand that even if you are using a card or writing a check, that you are still spending money. If they are earning money with household chores or babysitting, encourage them to save some of it for later, but allow them to spend a little on themselves. If they are asking you for a new iPad or video game, explain that if they save their money as they earn it, they’ll be able to buy what they want for themselves. While they might not enjoy the wait, in the end they will appreciate that purchase and take care of it, knowing what it took to achieve their goal.
Once your kids reach high school, opening up a checking account and letting them handle some of their own money is good practice, but encourage them to keep close track of their balance. That first overdraft charge is a harsh lesson to learn! Having a part time job at this age teaches responsibility, and gives them a taste of “adulting”. There’s nothing like the feeling of that first paycheck! Unfortunately, that is usually followed by that first realization of payroll taxes! Again, encourage them to put some of their money in a savings account, but allow them to spend some on themselves. Ask them to think a little further into the future, planning for events or purchases that will need some of the money they are making now. Make sure they understand that using credit cards to buy whatever they want, whenever they want, may cause problems, not to mention high monthly fees, when it comes time to pay them off! Discourage impulse buying and assure them it’s okay if someone else has a newer car or a newer cell phone. There will always, always, always be someone with more money. Being content with what we have, while still working towards something better, is a good lesson for adults, as well as teenagers.
Teach your kids to give back, too. It’s never too soon to show your kids how to support local charities, support the needy, and to be aware that there is always someone who needs help. Encourage the little ones to donate old toys to a local homeless shelter. Volunteer at a soup kitchen as a family. Help your kids set up a lemonade stand to raise money for the local animal shelter. Teaching compassion to your children, like financial responsibility, is often best done by example.
As your children grow, explain in terms they will understand about earning and saving money. Give them ownership of their spending, as their maturity warrants. Teach them the rewards of working and saving for what they want, and the result will be financially responsible adults.