Teaching your kids good budgeting skills and positive financial habits can prove to be a challenge when they don't see much need to plan past the weekend. Beginning to teach them about managing money responsibly can start early to help instill that knowledge for the future.
Here are five tips to help you teach your kids about keeping healthy financial habits.
Let Them Start Learning How Money Works Early
While kids have to wait until their teenage years to seek official employment in most cases, there is no reason why your kids can't start learning how to manage and handle money before then. Offering an income in the form of an allowance lets your kids understand the value of a dollar, as well as what it takes to earn money for themselves.
If one of your kids has a big item they want to purchase in the future, showing them how to budget their allowance over time to save for their big purchase is a great way to teach kids positive saving practices.
When it comes to providing kids an allowance, try to make sure that they are earning their weekly or monthly "pay" through some form of service like household chores, yard work, or even good academic performance.
Start a Savings Match Program
One of the most important money lessons that you can instill in your kids is the importance of saving. This can look different depending on the age of your kids and what stage they are in learning about money management, but teaching the fundamentals of good savings practices is essential when teaching good financial habits.
Much like offering allowance and monetary incentives, starting a savings-match program with your kids is a great way to encourage them to save money rather than spending it quickly after they receive it.
Set a dollar amount with your kids that you will match up to if they put that amount in a savings account. This gives your kids an incentive to save money knowing that the amount they save will essentially double with your contribution, and also gives them a low-level insight into how investments work, and even an early idea of what things like 401K matching plans will look like at a future job.
Set a Strong Example
Kids learn from what they see every day, more than they will learn from any lecture, discussion, book, or pamphlet. Making sure that you are setting an open example of good money management and financial habits is an easy way to help instill similar habits in your kids.
This includes being open and honest with them, once they reach an appropriate age, about things like credit card debt, different kinds of debt, and especially the ramifications that can occur when poor decisions are made around debt.
Talking to your older kids about things like interest rates can not only help them understand the importance of money management, but also helps with growing math and analytical skills.
Related: Financial Guide for All Ages
Let Them Make a Few Money Mistakes
It can be easy to want to constantly prevent our kids from making mistakes, especially when it comes to something as important as money. But letting your kids make mistakes like impulsive spending on a novelty toy or game or deciding on instant gratification rather than a longer-term goal they had previously set can teach them a hard lesson.
For any questions or help with managing money for you and your family, contact the financial experts at Caldwell Trust today to speak with an advisor.