How to teach your kids about money

Children are a lot more capable of learning money skills and habits at an early age than we usually give them credit for.  If you’re wondering when would be a good time to get them started, the answer is now! Start them young and by the time they become adults they will be pros at managing their finances.  Even if your kids are older and you think you’ve waited too long to start, it’s never too late. Here are my tips for teaching your children about money.

Lead by example

No matter how much time you spend teaching your children about money, they will learn far more from observing how you manage your finances.  This means you should pay bills, grocery shop, and work on your monthly budget in front of them so they can see the work that goes into saving money.  This also means they will be watching when you decide to go over budget by impulsively splurging on something or when you decide to budget and save up for that item you’ve been wanting.  A lot more is caught than taught, so make sure you’re setting a good example.

Don’t give them an allowance, pay them for certain chores instead

There are some chores they should do simply because they need to contribute to the household. But there should be other chores that you pay them to do.  This is better than giving them an allowance because it will teach them to work for their money. No one will pay them an allowance when they are adults, they will have to work to earn a living.  Paying them for chores will teach them this concept.

Teach them to Save, Spend, and Give

Hand them 3 envelopes and have them label each one and decorate it however they want.  Each week when they get paid, have them put some money in their “save” envelope, some in their “spend” envelope, and some in their “give” envelope.  Have a talk with them and help them decide how much money should go in each envelope. Then every month or two, take them to the bank to deposit the contents of their “save” envelope. (For more information about bank accounts for children, check out this blog post).  Also, once every month or two, help your children donate from their “give envelope” by having them take their money to church to put into the collection plate and/or send it to a charity they connect with.

Have them pay for their own wants

As their parent, you should continue to pay for the things they need, such as food and clothing (at least the basics).  But if there is something they want, like a new phone case or art supplies, have them pay for it themselves. That’s where their “spend” envelope comes into play.  Have them always carry some spending money with them. That way if you are at the store with them and they ask if you can buy them something, you can tell them to buy it themselves.  Doing this will also teach them to think about whether or not that item is worth the money they worked so hard to earn.  

Steps to a bright future for your kids

Starting out with these steps will help get your kids on the right track to managing their money wisely.  Remember, teaching them the behavior aspect of earning, saving, budgeting, and making their own purchase decisions will have a greater effect than trying to sit them down and teach them money lessons.  They will learn by doing, and they’ll probably make a few mistakes along the way. But it’s better that they learn these lessons now within a controlled environment than during young adulthood.  

Do you have any other tips for setting kids up for financial success?  Please share in the comments! I’d love to hear about other strategies as well!