Part of parenting is teaching good habits, yet many of us forget that advice when it comes to money. We seem to think we can wait until our children finish high school, or even college, before we talk about how to handle finances.
Not true. Start teaching kids about money as soon as they learn to count. And believe it or not, you are already making an impression. They are watching what you do with your money and how you talk about finances. A few tips:
- They can’t buy everything they want. Model that behavior. Take them to the grocery store. Tell them for example, “We can buy potato chips or ice cream today, but not both. We might need to use our money for something else, like milk or bread.”
- Have them save their money. Look for opportunities to save. If your son receives a gift of $20, require him to save at least $5 (20%). If he receives $5 a week for his allowance, make him save at least $1 (10%). Once your child has $40 or $50, open a savings account. Show them bank statements so they see the balance growing. For money that doesn’t immediately go into savings accounts, use a glass jar so your child can see the jar filling.
- Let kids make mistakes once in a while. If your daughter wants to spend $5 for a chance to win a stuffed animal at a carnival, explain what else she could buy for $5 and remind her that even if she wins the toy, she’ll likely sell it for 50 cents at a garage sale. If she still decides to risk her $5, hopefully she’ll eventually realize her mistake.
- Require kids to have a job during high school. When children earn their own money, they better appreciate the value. Once he earns a paycheck, explain that if he wants a third pair of basketball shoes, he’ll need to buy them himself. He may think twice about spending his own money. A side benefit: Colleges and first-time employers like to see a child has had a job during high school, especially if their grades don’t slip in the process.
- Open a credit card with a small credit line. Credit cards? Consumer experts say giving someone 18+ a credit card can help them build good credit while they’re young. Be sure to train them to repay the balance in full before fees/interest hit each month.