When you teach your children about money, you teach them all sorts of valuable life lessons. You educate them about patience, thriftiness, long-term planning, generosity and more.
You might consider the habits below as you’re deciding what to tell your kids about money. By internalizing these behaviors, a child can grow into a financially responsible adult who never has to worry too much about his or her credit score.
1. Expecting to Earn, Not Receive, Money
Young children should first understand the basic tenet of capitalism: People get money in exchange for work. Cash doesn’t just magically appear (except maybe when Grandma and Grandpa visit).
To reinforce this idea, occasionally ask your children when they’re in elementary school to complete certain tasks. For example, you could vacuum the house together, or they could put the leaves that you rake into garbage bags. Afterward, you could give each of them a dollar to keep in a safe spot in their bedrooms.
2. Saving, Saving, Saving
Bring your children to a bank to show them how you deposit cash and checks. They might be fascinated to watch the mechanics of the process. If no one’s in line behind you, you might even hold up one of your kids so that he or she can swipe your card.
As you leave, explain how the bank is holding onto your money in much the same way that they’re storing their dollar bills in their rooms. That way, if you ever need money for something expensive like a new car, you’ll have access to it. If an emergency like a sudden sickness arises, you’ll have the funds that you’ll need to cover your medical bills and other expenses that come up.
You might even talk about how the bank gives you a little extra money now and then as a reward for saving with them — an amount that’s called interest. To really drive home the point, emphasize how saving gives you a happy feeling inside, sort of like eating an ice cream cone.
3. Only Buying What You Need or Really Want
Start working with your kids on their impulse control when they’re young, and keep reminding them of its importance until they’ve left home for good. Indeed, many adults struggle with delaying their gratification.
When you’re at a supermarket or a mall, wait for your child to point to a toy and ask for it. At that point, you can discuss how people shouldn’t buy something as soon as they see it. Instead, they should go home and think about it.
You can continue by saying that, every once in awhile, people should pick one item that they saw during the previous month or so and purchase it. That way, they won’t spend more money than they can spare, and they won’t hoard stuff that they’re never actually going to use. And by waiting, they can appreciate the things that they get even more.
You can also teach this lesson by example. For instance, you could point to an easy chair or a painting in a store and tell your kids that you’d like to buy that object but won’t. Rather, you’ll wait to make sure that you can afford it.
You might have to endure plenty of whining at first, but soon enough, delayed gratification will become a way of life for your little ones. They’ll eventually be proud of their ability to walk away from toys and other appealing items.
4. Creating Budgets
As soon as one of your children has money coming in regularly ― whether it’s from a job or an allowance ― it’s time to discuss budgets. Sit down with your son or daughter on the first day of the month. Together, make a list of all of his or her projected expenses that month, being as thorough as you can.
Deduct those expenses from your child’s total monthly income. The two of you should then negotiate how much of the remainder will go into a savings account. The rest can be used for social activities.
Until you’re confident that your child can handle budgeting, keep track of how much money he or she has on hand, and have a storage container for all receipts ― a place where you can look at them whenever you’d like.
By imparting the importance of budgets, you’ll help ensure that your son or daughter will someday have a strong credit report, even if he or she needs credit repair services once in awhile.
5. Ignoring Advertising
In your home and car, you might turn the volume way down when TV and radio commercials come on. Likewise, encourage your kids not to pay much attention to billboards and internet ads.
In our society, advertising is everywhere, and it can be loud and intense. Worse, much of it targets children in sneaky ways. Thus, tell your kids that commercials often make foods look tastier and toys more exciting than they really are. Also try to emphasize how commercials sometimes sell things that people don’t need at all. Resisting ads can save consumers of any age lots of cash.
Teaching your kids about money can be fun. You’ll bond with them as you put coins in piggy banks, use toy bills to explain savings accounts and decide which snacks to buy at the supermarket. Your children will probably remember these times together with great fondness.