We all want our children and grandchildren to grow up to be financially stable, to make smart financial decisions, and to be confident in managing their money. Early, consistent teaching about finances is critical—and it’s never too early to start with your own kids and grandkids! Here are 5 tips to help you teach money management principles to your kids.
1. Show your children how to create a basic household budget
Allow your children to see how much basic living expenses cost (rent or mortgage, utilities, groceries, transportation, etc.). Make a list of recurring expenses, as well as a list of discretionary spending, and compare it to their hypothetical total monthly income. Take the time to balance the budget with them, considering where expenses may need to be reduced or cut all together to avoid going into debt. As you work through the budget, explain the difference between needs versus wants. Read More
2. Allow your children to earn a weekly allowance
While charts and visual aids are helpful when teaching children about money management, hands-on learning goes a long way. Teach your children that an income must be earned and give them age appropriate household chores to complete each week. If you increase their allowance each year, teach them about inflation. Read More
3. Set a goal and create a savings plan
Your child wants a new toy or to go to a concert with friends. Rather than making the purchase yourself, help her create a plan to save a percentage of her weekly allowance. Make a chart to visually track progress each week, marking off how much she’s saved to date and discussing how much longer it will take to reach her goal. Spend time talking to your child about why she wants to purchase this item, taking the focus away from the money and toward the value of the purchase. Read More
4. Involve your children in your charitable donations
Teach your children to divide their money into 3 categories: spend, save, and donate. Giving to charity allows you to discuss income disparity with your children and helps them to understand the importance of generosity. One way to do this: make a charitable donation part of their birthday gifts and allow them to choose the receiving organization. Read more
5. Make investing fun for the whole family
As your children get a bit older, give them a basic understanding of the stock market and investing by creating a hypothetical portfolio. Allow them to pick companies they’re actually interested in (Disney, Nike, fast food chains, etc.) to keep them engaged. Everyone in the family can create their own virtual portfolios. Over time you can track how well the companies did and learn from the ups and down in the markets. Watch our full London Wants video about being a savvy investor to learn how we approach investing topics with kids.
Financial discussions should never be taboo. By teaching money management to your children and grandchildren from an early age, you’re helping to set them up for a successful financial future.