Sammy Rabbit here. Talking to your kids about personal finances can be daunting, but I can help.
Daily life presents an abundance of opportunities to build kids’ financial capabilities. Master Your Card and I are excited to share five ways to gently and effectively talk smart money habits with kids – because good financial health should start early!
Before we dive in, remember step one is to start with you. Define in simple terms the money habits you value and want to teach your kid(s). Reading will help you to do it. Read books. Read blogs. Read personal finance magazines. Read newspapers. Diversify your reading; the more you read, the better. Try reading before you go to sleep. You may be surprised how much you pick up skimming an article right before bedtime! While you’re reading about finance, encourage your kid(s) to do the same. Knowledge is powerful, especially when acted on. Two of my favorite reading resources for kids can be found here.
Four More Strategies to Instill Smart Money Habits in Children
- Save Your Money – Make it a Habit!
Make it a point to show children saving money regularly is important and a priority. An easy way to do this is by giving children a piggy bank they can keep in their room. Likewise, you can have them create their own unique and personalized savings jar. Share with your child that saving is a great habit. Explain that saving helps us get things we want:
- It helps us be better prepared for emergencies and unexpected occurrences
- It better positions us to give to and help others
- It gives us more freedom
- It provides more safety and security
- It builds our future
Every time your child earns or receives a sum of money, get them in the habit of making a deposit into their savings. Establish this as a routine. Use those “money moments” to refresh and reinforce your messaging on the value of saving consistently.
Teaching kids to make a habit of saving is arguably the most valuable money lesson you will give them. Not only because saving is the foundation for financial security and wellness, but because saving teaches delayed gratification, instills discipline and builds confidence.
Saving says to a child “your future is important. You are going somewhere. You are worth investing in.”
- Have a Plan for Your Money – A Budget (and Stick To It!)
A core ingredient to achieving and sustaining financial success is to learn to live within our means. The sooner we learn to do this, the easier it is to do. Each of us is going to spend money. But, while spending, your goals should be to:
- Make a habit of spending less than we earn or receive
- Spend smart – get value out of all the money you spend
- Give your pennies a purpose.
Like any limited resource, it is important to plan how to use those resources.
Simply having a plan gives anyone and everyone a better chance of reaching their goals. That is what a budget is – a money plan. It is a tool to help us think about our money choices and enables us to reach more of our goals.
Share with your children how certain behaviors impact a budget. This will help them learn to make more informed and better spending decisions. For example, if your child wants to order a pizza for dinner, ask them if making a meal at home to save money for a vacation, a new car, or another goal is a better choice. When one compares and considers what they are giving up by making one choice instead of another, they are becoming a more educated and sophisticated consumer. In doing this, you are teaching children a personal finance concept referred to as “Opportunity Cost.” It is a “biggie!” Mastering this concept, which has a person weighing out choices, will lead to better decision making and accelerated success.
Like all education, take it step-by-step. It has never been easier to access outstanding money management resources. You can do it online and in an instant. That includes planning and budgeting tools. Check out this Master Your Card Resource . It will help everyone in the family become more proficient at budgeting!
Give your Child a Glimpse of What it Means to Use a Bank or Credit Card
To be capable in today’s world, it is becoming increasingly vital to know how to use “invisible” money. By invisible money, I mean debit cards, credit cards, Bitcoin, etc. Putting your money in a bank account and using electronic technology gives you and your children greater access to the global economy. A significant portion of the world is already operating in this manner and it is going to increase. Events like the coronavirus pandemic are serving to speed up the transition to “cashless” societies. Agree with it or not, it is a reality! Awareness, education, practice, familiarity and repetition are the keys to competence. Slowly and systematically get your kids up to speed on how to use digital money. You can begin at home with online purchases. Gas stations, convenience stores, and ATMS all present opportunities to practice. Take children on a trip to the bank. Have them deposit a check or greet and meet with a teller. While there, explain two reasons you keep your money in a bank are to ensure it doesn’t get lost or stolen. While there, explain that:
- With a bank, you can access your money with your debit or credit cards anytime
- You can use debit and credit cards to pay for things whenever you like
- There are advantages and disadvantages that accompany a credit or debit card.
I cannot stress enough that learning should be incremental. Education is a process. It should reflect your values but be consistent with proven money management strategies. You are in the best position to assess your child’s capability, what is appropriate for them to learn and when.
- Teach Kids the Value of Hard work
Having conducted hundreds of interviews on money with experts, parents and teachers across all socio and economic demographics, one theme has emerged repeatedly. The ability to “work hard” is an asset. And, it is a behavior many are thankful they were taught early in life. Often interviewees have mentioned that their moms, dads, grandmothers or grandfathers served as role models and motivated them to want to be people with strong work ethics. Be sure to do the same for your children. One way to do it is by giving them lots of opportunities to earn money. Doing this will broaden their perspective on money. If they have to walk the dog to earn $2, $5 or $10, your child will begin to think and make different associations related to money. It may not happen instantly, but it will happen. Soon enough, you will notice they may be much less likely to blow all their earnings on candy!
These tips to teach your kids good money habits will move them closer to financial independence and security. Adopting the right habits – including money – empowers, transforms and creates more rewarding lives. To quote Aristotle, “excellence isn’t an act, it’s a habit!”
If you’re looking for more strategies to teach your kids about money, check out my collection of storybooks, songs, activity books, and resources.
Help your child to begin building good money management skills and develop smart saving and spending habits, with our Student Checking account.