As a parent, you’re in a unique position to teach your kids about money — helping them avoid common mistakes and build successful saving habits.
While you may not always feel comfortable sharing your own trials and errors, there’s a big benefit to being open about your finances: You can help your child strengthen their financial literacy and give them the knowledge they need to make informed choices. Promoting financial literacy for kids now can help them become financially literate adults that make wise money moves later.
Need a little help? Here are 9 tips to make teaching kids about money a bit easier:
- Do the research: Educate your kids by first educating yourself. Speak to your financial advisor about financial resources and visit www.talkwithourkidsaboutmoney.com to find a range of ideas and activities for kids.
- Share your experiences: No one expects you to be an expert. Don’t be afraid to share mistakes you might have made or things you wish you had known earlier in life. Think of your first money mistake, and teach your kids about finance through storytelling.
- Speak their language: When teaching kids about money, use concrete but relatable terms for youth. Meet them at their level and discuss money in relation to things they understand. A 12-year-old might not understand complex investing strategies, but they can understand how their savings now can grow in the future.
Related: 6 apps to help your kids learn about money
- Make it interactive: Involve kids in activities that make finances tactile in interactive ways — don’t think of it as a “lesson.” Go grocery shopping together, explain how gas and hydro bills are calculated and, when age appropriate, bring them into the family budget planning process.
Tip: Do your kids really want a new toy or the latest gadget? Show them how much it is and, if they have an allowance, have them figure out how much they’ll need to save to buy it on their own. This exercise can help illustrate the power of a dollar and give kids much-needed context regarding how much things cost.
Related: 7 ways to use an allowance to teach your kids about money
- Give them real-world experience: Before hitting the grocery store, ask kids to develop a menu for the week with some of their favorite dinners. Together, calculate the cost per recipe and look for ways to lower costs. Real-world experience can make money management for kids come to life.
- Be proactive: If you have kids in high school, encourage them to prepare a budget for how much they think they’ll spend on prom (the tux, the dress, the hair, the car — it can get expensive!), and open up an account for them to make monthly contributions to reach their budget goal.
- Focus on value: As your kids get older, it’s important to illustrate the difference between needs versus wants. When there’s a new pair of shoes or a toy that they simply must have, create a rule that the older version gets donated to a local charity. This will help show the value of (and hopefully facilitate an appreciation for) new things.
- Teach delayed gratification: A key component of mastering personal finance is understanding delayed gratification. This is especially important for kids who want things right now. Let them know that things cost money and teach them how they can save up for certain items. Ask them if they are still interested in that item a week later. This important lesson can help them become mindful spenders and differentiate between wants and needs. As you help them do so, encourage them to ask questions, such as:
- How much does this cost?
- How much of my allowance/work does it take to pay for this item?
- Do I really need it?
- Is there a more affordable alternative?
- Will I use this item in six months?
- Illustrate the importance of having goals: A simple way to teach your kids about personal finance is by giving them goals on how to spend their money. One way you can do this is by having three jars for money; one for saving, one for spending and one for giving. Teaching kids about money through this method can be fun and help build strong money habits.