As the father of two young kids, thoughts on how to teach our children some good money lessons is always on my mind. It’s well understood that our relationship with money is formed at an early age.
How you decide to impart life lessons will depend largely on how old they are – the lessons that you will use with a child in kindergarten will look a little foolish to a teenager. It’s also important to try to actively teach them money lessons in addition to what they will learn just by watching you. The actions you take, the comments you make, and the emotions you show around money will all help shape their relationship with money.
At this age, it’s important to teach them about the basic concepts behind money. To start, teach them about saving. They won’t get a lot of money at this age, since they aren’t working, but they will probably be getting some monetary birthday gifts from relatives. Start by teaching them how to save that money in a piggy bank. As they put money in the jar, talk it through with them about what they’re doing and celebrate saving.
When you go to the store, it’s important to teach them that the items in the store cost money. To pay for them, you need to go to your savings, take out money, and pay for those items. As they get older, this concept will become clearer to them.
Around this age, kids understand what money is and what it can be used for. A strong lesson to teach around this time is the importance of giving. Some parents use the idea of tithing, which refers to giving 10% to your church, and apply it to charitable giving. You can help those who are less fortunate and it’s a powerful lesson.
If you give an allowance, consider tying it to chores to teach them about the importance of working and that money is earned and not simply given.
Around this age they might have an allowance or do odd jobs around the neighborhood for pay, you can open a bank account for them (it’ll have to be a joint account). Go through the process of physically going to the bank, opening an account, and giving them the bank card. You can get better interest rates from online bank accounts but the process of going to a branch is a teachable moment, something that won’t stick nearly as well if you open an account online.
Periodically, you can go online to see the balance or hit an ATM to check the balance.
You can also talk through the intricacies of credit cards once they have a debit card. Having them understand the downfalls of credit card debt is a huge lesson and one that they best learn before they go out into the real world!
College is a trickiest time to teach money lessons because your children think they are adults (and technically, they are!), especially if they are living out of the house. It’s important you continue to guide them when it makes sense. Help them avoid credit card debt at all costs, be more of a money and life counselor and less of a professor, and just be there to help them navigate the intricacies of life.
They won’t say they need your guidance, but they do and will thank you for it later.