Teaching your children about money is a difficult thing. There are so many different things to learn about personal finance. It can be tough to decide which things are important to emphasize for your kids. The situation is made even more difficult by the fact that we are often in a financial situation ourselves that goes against what we would like our kids to learn. Teaching them about money can therefore feel hypocritical. What you have to keep in mind is that there are only a few crucial things that you must pass on to your kids about money. Although a lot of other little things will be important, you really only need to consciously focus on a few things.
How to Earn Money
One of the most important things that we have to learn in this lifetime is how to earn our own money. Families teach these lessons in a number of different ways. Some options for teaching your kids how to earn money:
- Chores. Many families have their kids do chores in exchange for an allowance.
- Extra chores. Some families believe that chores are a part of participation in a household and don’t pay their kids for chores. However, you may decide to allow kids to do extra chores in excess of their normal chores and pay them a small fee for that work.
- Summer jobs. Working keeps older kids busy during the summer and teaches them the valuable lesson of how to earn their own money.
- Part-time jobs. Kids who are in their older teens may be encouraged to work part-time while attending school. Juggling work with other responsibilities is an important thing to teach our kids.
Of course, you also need to teach by example. You should have a job. If you are currently unemployed, you should show your kids what you are doing to try to get a job.
How to Budget Money
Once children start earning their own money, they immediately need to learn how to budget their money. Debt is one of the biggest problems that we all have with money. Budgeting is a direct way to prevent and deal with debt. This may be something that you are still learning yourself but you surely know how important it is to teach your kids. Some tips for teaching kids to budget their money:
- Never buy your kids something because they say that they will pay you back later. Teach them instead that they must save up their money until they have enough and then take them to go buy the item that they wanted.
- Present children with “either/ or” choices even when you are paying for items. For example, they can either have a soccer ball or a new shirt but not both. This kind of thinking helps kids get used to the idea that they sometimes have to give up one thing in order to get another. That’s an important lesson to know to help with budgeting.
- Help kids set small goals to save up for a big item they want. Encourage your kids to find an item that they really want to own. Teach them with charts and small goals how to save up to purchase that item. When they want to buy something else, remind them that they are saving for a goal.
- Make older kids responsible for their own monthly costs. For example, many kids pay for their own cell phones. They will quickly learn that if they don’t budget for those payments then their phones will get turned off.
How to Save
It is crucial that you teach your children how to save money. This means more than just saving up for a big purchase. It means saving up an emergency fund for the future. Teach kids how to work a savings plan into their budgets. Encourage kids to set aside a portion of all money that they receive in a savings account that you help them set up. Show them how interest accrues to reward them for savings. Be open about your own savings efforts.
How to Find More Information
There are many other important things to teach your kids about money. For example, kids should know how to set up a bank account, use a debit card and read a bank statement. Kids should learn the basics about credit cards, debts and loans before they leave for college. However, what’s more important than teaching them these specific things is teaching them how to access that information as all of these different financial challenges come up in their lives. Teach them about assistance from company customer service centers, financial books and blogs, etc. Be open in your communication about money and your kids will even come to your for more help!