Smart money habits start early
As a parent, you have surely been surprised watching how quickly your young child begins to form habits and absorb information. Looking out for your child’s financial future doesn’t just mean saving money on their behalf—it also means teaching them lessons about money management before they have financial obligations of their own. The financial skills that your kids learn now will pay dividends their whole life.
If you’re looking for the right way to start teaching financial health, First Tech is here to help. Here are a few ways you can start to share some general money management tips with your kids:
Let them make their own money
To get your kid invested in smart money management, it’s important to let them earn their own money. Establishing their own income can help give your child a sense of ownership, and can help them become invested in their own financial education. Whether it’s a regular allowance or money for finishing chores, providing them with their own funds can help get your child enthusiastic about how to save or spend.
Wants vs. needs
After they begin earning regular income, talk to them about the difference between wants and needs. Without bills, insurance or a mortgage to pay for, it can be hard for kids to appreciate the distinction. But the concept of opportunity cost—or the value of something that must be given up to achieve something else—is good one to learn early. Explaining that “if you buy X now, you won’t have money to buy Y,” can help get your child thinking about the importance of savings and prioritizing their wants and needs. Setting a spending limit for them can also help prioritize how they use their money.
Keep a spending journal
It is also helpful to have them track all of their spending for at least a month—preferably longer. Keeping a list of all their purchases is a good way to help them begin to see patterns in their spending. Identifying patterns is an important step towards learning how and when to save, and how to limit frivolous expenses.
Talk about money
Above all, make sure you talk openly about money with your kids. Communicating your financial experiences and financial standing when appropriate is a great way to develop your kids’ financial literacy. It is sometimes considered taboo to openly discuss finances, but detailing your financial decisions, plans and experiences—both good and bad—is vital to growing and learning. Starting that line of communication early with your child can help positively shape their understanding of financial planning.