Teaching Kids About Financial Health
Creating a budget, balancing a checkbook, managing investments. These may seem like tasks from your ever-growing to-do list, but they are actually topics that are important to building knowledge about money with children. While we may not want our young children tied up in the worries of finances, we should be focused on creating healthy dialogue and habits related to money. Here are a few ways to develop healthy financial habits in kids starting at a young age.
Start With the Basics
From the time children are old enough to recognize coins and bills, you can begin working on healthy financial habits. The first lesson may be to not stick pennies up their nose, but still a valuable lesson! In all seriousness, as soon as children can identify money you can start showing them the uses and value of cash. While many of us never carry cash these days, try to make a point of bringing cash with you to a place you know your children will be with you so that they can see the process of payment and making change. They will also start to make a connection between giving the cash in exchange for goods. If you would prefer to not carry cash at all, you can still use this teaching method by discussing the use of your credit/debit card and showing your child the receipt after your purchase. The more you can associate the connection between money and purchasing goods, the more likely they will be to understand the process at their young age.
Spending vs. Saving
Now that your children have seen the process of spending and have a grasp on that concept, you can introduce the idea of saving. This might be a little more difficult for children to understand at first since there is less of an instant result for them. If your children are still really young, it may help to set short savings goals that are easily attainable such as saving for a toy or a favorite treat. As we age delayed gratification becomes a little easier, but still not always as fun as the instant rush of a new purchase. To help make the concept a little more concrete, it may help to open an account at a local bank so they can review their statements and see the effect interest has on their savings.
Earning and Budgeting
As children grow it may be time for them to start earning an allowance. What the allowance is for and how much it is are all personal decisions, however, typically household chores are part of the allowance equation. In the current digital age, there are many apps out there that can help you set up chores and requirements for allowance payment. Many of these apps also allow the children to have an account linked to a debit card so that they can spend their money in approved places. One such app, Greenlight, also has the ability to split the weekly allowance into spending, saving, and giving categories, which can help parents approach the topic of charitable giving. Once children have an established way to earn money, setting up a budget with them is a good way to introduce the concept that spending money isn’t always fun. Consider creating a sample budget based on scaled down versions of your household expenses to show them everything that goes into monthly spending.
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