5 Valuable Skills to Raise Money-Savvy Kids
Trying to raise money-savvy kids seems to be getting harder. Raising kids to appreciate the value of a dollar is a challenge all parents need to tackle sooner than later. Ignoring the topic of money may result in parents supporting their grown children into retirement.
The next generation has often been described as lazy, entitled, self-centered, unambitious brats who seek instant gratification. But, if you think about it, not that long ago, your generation was also ridiculed and described in negative ways. While these stereotypes may reflect some of the population, they don’t reflect the majority. You can help transform the image of your kids’ generation by educating them on the most valuable lesson in life – money management.
Teaching your kids about budgeting, earning, spending, saving & borrowing is one of the best things parents can do for their kids’ long-term success in life.
1) Show Them How To Budget
Making a budget is the most important step in money management. Start with explaining income (money-in) and expenses (money-out). Show them how to track the money they receive from allowance, gifts, and chores and money they spend on candy, toys and other purchases. Get them to track their budget on paper or through the various money tracking apps designed specifically for kids.
2) Help Them Understand Earnings
Even if your kids aren’t working yet, they need to get an understanding of what it takes to earn money. You need to dispel the notion that they can just use a plastic card and get whatever they want. Introduce paid chores that are a little harder than their current abilities so that they can improve upon them. Give them an allowance for the regular age-appropriate chores. Kids that get an allowance are more apt to manage money better as adults than those that don’t get an allowance.
3) Teach Them Smart Spending Habits
Involve your kids when making shopping lists and have them come with you. Show them in the store the differing prices of items – generic versus brand name. Going to the shopping mall for clothes is another teaching opportunity – explain the cost of something and how much of their allowance it would take to purchase that item. Knowing how long they would have to save to buy that pair of jeans will give them a better appreciation of the value of those jeans.
4) Explain the Importance of Saving
Give them examples of why savings are important. Make sure the examples you provide are relatable to them. Show them how saving just $10 a week can add up over time. Explain savings goals and have them add a savings goal to their budget. A great thing about savings goals is that kids tend to change their minds often, so once they reach their goal, they may decide to keep savings rather than spend.
5) Educate them on Borrowing
As important as savings are, they will be tempted to apply for the credit cards once they are eligible. Having an understanding of what credit is and how to use it responsibly is a key to their future financial success. You can start modeling proper credit behaviour when they borrow money from you. Implement a set repayment date, and if they don’t pay by the due date, tack on interest and make sure you stick to it. The best way to learn something is by doing and it’s better they make a mistake with you then down the road with a creditor!
Ultimately, your kids will look to you before anyone else for setting a positive example on money management. If you aren’t being smart with your money, don’t expect your kids to magically know how to manage theirs. It’s up to parents to raise financially responsible kids who will eventually become contributing members of society.
Raising money-savvy kids involves more than giving them a spreadsheet to keep track of their money – model the behaviour yourself. As your kids get older, introduce more money and social concepts to them such as volunteering and donating. Remember that these skills will stay with them for life and will hopefully be passed down to further generations.