Kids and money: how to develop good habits early
Children start to learn financial habits from their parents at a young age. Here’s how to teach yours to be money-wise…
Back in my day, kids received an allowance for their weekly chores and they were told to save up their pennies if they asked for an expensive item or a vacation. But in an increasingly cashless society where children are (arguably) expected to do less than we were, how can we teach them the value of money? Here are six tips adapted to modern life…
- Pay them an allowance
Financial experts still agree that giving children an allowance is a great way to teach them about money, but many believe that they shouldn’t be paid to do their everyday chores because they should learn to help out around the house without a cash incentive. Instead, parents should encourage children to do extra jobs – such as raking leaves and washing windows – to earn money.
Young ones will benefit from being paid in cash so that they can see the value of it and count it, whereas older children might enjoy receiving their money in a banking app. Kids of all ages should be taught to separate their allowance into different categories, such as “save”, “spend” and “donate”.
- Open a bank account for them
This is a great way to teach kids about keeping their money safe and to encourage them to save. Even young children can get a kick out of watching their savings grow when they receive their monthly statement!
- Model good habits
If your kids regularly watch you make impulse purchases without thinking about how they’ll affect your finances or indulge in “retail therapy” to cheer yourself up, they’ll learn to do the same. When you’re tempted to buy something you hadn’t planned on, think twice about it and tell your children why you’ve decided to wait.
You might say, “I really like these shoes, but I’m not sure whether I really need them. I’ll clean out my closet and if I still feel that I need them next week, I’ll come back and buy them.”
- Pay in cash
Many young children hardly ever see money these days. Instead, they watch grownups wave around plastic cards to buy everything from a pack of gum to a car. Some experts suggest paying in cash when you’re with your kids to help them see and understand the value of money.
- Involve them in the family’s finances
Talk to your children about the importance of saving money, tell them what you’re saving for as a family and encourage them to set aside a portion of their own money. Involve them in planning the family’s weekly budget and ask them to help you find ways to save cash, such as checking the specials at the supermarket. Explain why you choose not to spend money on certain items by saying something like, “If we buy you those expensive sneakers, we won’t be able to go on vacation next month” rather than simply saying, “We can’t afford it.”
- Get them to pay for things they want
Whether it’s a candy bar or a trip to Disneyland, telling your kids that they can have what they want if they fork out their hard-earned cash will go a long way toward teaching them the value of money. If they’re asking for a big-ticket item, help them plan how they’ll save for it and how long it will take them. They might choose to do extra chores around the house, squirrel away their birthday money from Grandma or take on a part-time job if they’re old enough.