From an early age, your children are watching, observing your money habits. Those unspoken lessons can carry over into their adulthood. Start the new year out on the right financial foot for your entire family with these five tips:
1. Start by money behavior children.
If they only see you using plastic to pay for modeling good for your purchases (as many of us do these days), they may not understand that you are taking money directly from your bank account or that you pay off your credit card each month. Talk to them about this when you use your card for purchases, even when they’re too young to really understand — the more you repeat a lesson, the more it will sink in with them.
2. Get them involved!
When they are old enough to count coins (ages 3-5), let your children count out exact change for smaller purchases. Once they are a little older, tell them an amount you have in your account (it doesn’t have to be the actual amount, just give a number), and see how much you have left after a purchase. Talk about buying or not buying things as you go through the grocery store: “We have $5 to spend on fruit today — we can get this pineapple or this bag of apples and this bag of clementines. What do you think?” Talk about how you can make one meal of roasted chicken and then use the leftovers to make a family favorite such as chicken and dumplings. As they get even older, let them plan how to stretch a meal into several and even let them cook as an extra bonus for you!
3. Tough financial lessons
It’s hard to see your children make mistakes. You want the best for them and don’t want to It can be hard see them upset. But sometimes, the best lessons are the ones you let them teach themselves. I’ve heard it said, and it’s a great rule of thumb for kids: You can only spend money once. So, if your child is saving up for that latest and greatest video game or for a new pair of fancy soccer cleats, and they blow their money on buying extra dessert at school or going to a movie with friends, don’t come to their rescue! They may have to wait two or three times as long before they get that purchase, but it will always mean more if they have some “skin in the game.”
4. Show them how to save and how to spend.
If you give your child an allowance, give them some jars or envelopes to split their money for spending, saving and even giving. Talk with your child about how much to put in each time they get “paid.” Discuss their short-term and long-term goals (buying a new, trendy handbag or saving for a car), and how long it will take them to realistically reach those goals.
5. Look to the future
More more people are using online banking cash or checks these days. Help your children understand how to make these options work for them. Some banks allow youth accounts, complete with debit cards. I have chosen this route to distribute allowances in our house, and it has shown my children (now teenagers) how those plastic cards we use for purchases work.
They have their accounts set up to automatically split their “pay” between their savings accounts and their spending accounts, and they know they use their spending money for dinner with friends or presents for the holidays. They have also become pretty good at checking their balances and they love seeing the interest that gets paid to the savings accounts each month just by letting their money sit there.
5. Bonus tip: Financial lessons are everywhere
The ice cream man can even help you teach a financial lesson. A few years ago, I gave my then-seven-year-old daughter $2. She later heard that familiar bell coming down the street and could not wait to fork over her $2 for a rocket-shaped popsicle.
That afternoon, we went to the grocery store and I showed her how a box of six of those same popsicles were on sale for $1.99, and casually mentioned that she could have bought five more for the price of one from the ice cream man. The next time the ice cream man’s bell rang out, she looked at me and said, “I’ll save my money for the grocery store. The ice cream
man is just too expensive.