Parents, you want the best for your children. You don’t want them stumbling through life struggling financially and figuring it all out for themselves, do you?
This means talking to children about money at a young age and teaching them how to use it properly.
The Penny Hoarder conducted a survey of over 1,500 people on the subject Financial literacy and found that a third hadn’t learned basic personal finance concepts by growing up. You don’t want your kids to reach adulthood without knowing how to make money and save.
Among Americans who did not acquire early financial literacy, 40% have no savings and 31% earn less than $ 50,000.
Children start developing financial habits at a young age. So don’t wait until high school to talk to your kids about money. If they’re already teenagers, that’s fine. There are still many ways to teach them how to make money, spend smartly, and save up for important things.
Earning, Spending, and Saving are the three main components of budgeting. This is how you get your children to understand these concepts.
Teach your children that money doesn’t grow on trees
It doesn’t just magically come out of an ATM either. It is important that children understand how to make money.
1. Treat allowances as a lesson in a job
Allowances can be a sensitive issue for parents. Some do not believe in rewarding children for the work they should do as members of the household. Others just don’t have the money to give money to do housework.
But an allowance can help children make the connection that money is given in exchange for work.
It doesn’t have to be a lot. You can start by rewarding your little ones with $ 1 a week for setting the table or sweeping the floor. Or, you can only pay your children for chores that go beyond their everyday chores, such as chores. B. Mow the lawn or wash the car.
Another way for your children to learn that work pays off is to give them money for certain school grades.
2. Promoting entrepreneurship – or regular old jobs
From lemonade stands to babysitting, there are many ways kids can make their own money. Lean into their interests and use them to inspire your kids to become entrepreneurs.
Caroline and Isabel Bercaw loved using bath bombs and were only 10 and 11 years old when they decided to make and sell their own at a local art fair. Less than three years later, they were asked by Target to sell their bath bombs in stores Da Bomb Bath Fizzers grew into a million dollar company.
Your children don’t have to turn their entrepreneurial activities into millions of dollars. Maybe they’re just raking leaves for neighbors or teaching other students to earn some pocket money.
Once they are old enough to legally work in your state, your teen can find or part time Seasonal work as a way to earn an income. Retail, hospitality and theme parks are employers who often hire young people.
3. Talk to your child about how different jobs make different wages
Talking about salaries and income differences can be an awkward conversation. However, raising children guarantees that you will have an awkward conversation or two.
You probably want to wait until your children are older but want to talk to them about the expected salary ranges, job growth, and the different roles a person can play when talking about professional ambitions. This will help get an idea of what kind of lifestyle they can afford in the future.
Of course, money isn’t everything, so don’t crush their dreams by saying that if they pursue a career in the arts they will starve to death.
Teach your children to be savvy donors
A big part of budgeting is learning how to spend smartly. That means teaching your kids not to buy everything they like in the store.
4. Distinguish needs from wants.
Recognizing the difference between needs and wants is something that even adults struggle with. Even so, you should try to serve as a positive example and involve children in discussions about household expenses.
As you shop, point out that buying chicken, rice, and green beans is more important than goodies like ice cream or french fries. During the back-to-school season, share the importance of getting notebooks and pencils rather than setting up lockers. You could also explain why saving up for a new car for the family means skipping a summer trip this year.
5. Increase Deal Seekers
If you spend a little bit of money, your kids may get tunnel vision about buying something they want. Instead, suggest ways your children can get more bang for their buck.
Point out the prices in the toy aisle. Ask your child if they’d rather get the $ 15 toy they noticed first, or choose two similar items that cost $ 7 each. Take a look at the sales catalogs and introduce the concept of couponing.
Ask your children to think about what they need to do to get the money before they spend all of their savings on something frivolous. Ask them to wait a week before making spontaneous purchases.
6. Let them do the transactions
Children will create a stronger connection to exchanging money for goods and services when actually doing the exchange.
When they want to go for ice cream, help them count bills and coins from their piggy bank and have them pass the money to the till.
As your little ones grow, get them a wallet or purse to keep their money in. Ask them to buy a lunch at school instead of depositing money into their account online.
Some parents choose to do this Add your teenagers as authorized users of their credit cardswho creates a credit history for them and has the potential to bolster their credit scores. If you go down this route, you should teach your teen the consequences of charging up credit that you cannot afford. Use parental controls on online accounts that store credit card information, such as: B. Amazon, and regularly check your credit card purchases.
The CARD Act of 2009 prevents consumers under the age of 21 from applying for credit cards themselves without a stable income.
7. Teach teachings about generosity
Spending isn’t just limited to buying things for yourself. It is good practice to set aside money for donations, whether for charity, tithing in church, or buying gifts for others.
Giving teaches children to think outside the box and develop a philanthropic spirit. Many money experts recommend teaching kids budget by dividing their money into three jars – one to spend, one to give, and one to save, which we will discuss next.
Teach your children to save for the future
Children don’t want to wait for what they want. You want it now. Right now.
Help them combat instant gratification and save their money.
8. Make a save game.
Saving money isn’t the most exciting thing in the world, but you can enliven it for your children (and yourself).
Visually track savings. Have your child draw something that represents what they are saving for – for example, a musical note for concert tickets. Every time she saves money, you have her shadow in part of the picture.
Make saving money a challenge by letting your kids toss money in a jar and reward them when they refill it. Or take advantage of sibling rivalry by letting them compete with their brother or sister to brag about who can save the most, the fastest.
You can also create a game by finding coupons or offers. Reward your children with a portion of the savings they have discovered.
9. Open a savings account for your child
Piggy banks are great savings tools for young children, but a savings account introduces them to the banking industry.
Regardless of whether you want to open an account with a stationary bank, a credit union or an online bank, you should check the monthly statements with your child. Discuss how your money can grow with interest by keeping it in the account. Make sure you point out any account management fees or restrictions on withdrawals – and the consequences of exceeding those restrictions.
10. Talk about college early
College is one of the most expensive costs you as a parent have. The top? You have about 18 years to save.
If you involve your children in discussions about saving for college, they will become aware of the scale of investing in a degree. It can also open up conversations about alternatives to the extremely expensive private universities that are on your child’s list of best school choices.
Some parents have their children contribute to college expenses. If your teen has a part-time job, they can save a percentage of their income in a college fund.
Encourage other family members to achieve the goal of college savings by asking them to contribute to your child’s 529 college savings plan in lieu of gifts for holidays or birthdays.
Kid-friendly budgeting resources
When teaching kids how to budget, having fun on the go is a must.
Younger children can enjoy tossing coins in a piggy bank or reading a book like Inquisitive George Saves His Pennies. Several children’s museums across the country have exhibits geared towards shopping or banking. Older children may learn a financial lesson from board games like The Game of Life or Monopoly. This list of Money gifts for children Make great gift ideas all year round.
The Federal Trade Commission has several Videos and online gamesand Jackson Charitable Foundation has a number of kid friendly music videos about money that includes concepts like earning and spending.
Include your children in a finance-oriented organization such as Junior performance is another way to make learning about money interesting.
The National Endowment for Financial Education High School Financial Planning Program has resources for parents to talk to their teenagers about money.
For more advice on teaching your children about budgeting and personal finance, see the following books:
“How to Make Your Child a Money Genius (Even If You Are Not)” by Beth Kobliner
“The opposite of spoiled” by Ron Lieber
“Raising Financially Confident Children” by Mary Hunt
Nicole Dow is a senior writer at The Penny Hoarder. She is a parent who plans to teach her daughter all of the things she hasn’t learned about growing up money.
This article originally appeared on www.thepennyhoarder.com