For many parents, the idea of having the “money talk” with their kids is a terrifying thought. The biggest reason parents avoid the topic is they don’t believe they know enough about money themselves and fear they will give their children the wrong information.
Money is a necessity that affects all aspects of our daily lives. Avoiding conversations about money is creating bad money habits and exacerbating financial illiteracy in the U.S. And you can’t count on kids to learn about money in school. Very few schools teach courses on how to handle money the right way. Without learning money management skills at home, your kids are going to be in for a few nasty surprises when they get older.
At Heritage we believe it’s imperative to talk about money and enjoy educating our clients about all aspects of their financial lives. We don’t hear clients say, “I wish I didn’t know that.” No, instead we hear, “I wish I started earlier”, or “I wish I knew then what I know now.”
Here are four tips to begin teaching financial literacy to your kids today.
1. Let Kids Experiment
One effective way to help kids learn how to make budgets is to give them a chance to make mistakes on their own. A small allowance each week is the perfect incentive for children to learn how to budget. Do they want to blow this week’s money on candy and a cheap toy or save up a few weeks to get something they really want? Of course, some children will still be impulsive and want to spend their funds right away, but better they learn to make mistakes with $10 than $10,000.
2. Include Children in Household Budgeting
Do you have a shopping or entertainment budget each month? Try including an older child in budget planning for the next month. Kids learn quickly when they have to stay home bored for two weeks because they blew the entertainment fund during the first half of the month. Another great idea is to set a grocery budget for an upcoming trip, make your week’s list, and then take your child to the grocery store with you. As you place items in your cart, have your child add up the cost of each item until you hit your limit. This is another great exercise in making choices based on limited funds.
3. Gameify It
Turn budgeting and saving money into a game. Give your shopping lists to your younger kids and let them search online or in the newspaper for coupons and sales. Maybe you could promise to put a percentage of the money they save into a bank account for them to purchase something special down the road. You could even encourage older children to learn lifelong investment skills by participating in a stock trading simulator such as The Stock Market Game.
4. Make Them Earn It
Knowing how to save, invest, and spend money is important, but one of the best things you can do for your children is to instill a good work ethic in them by letting them earn money on their own. Whether your teen works part-time at the movie theater or you help your little ones start a lemonade stand, the willingness to work hard and be rewarded is one of the best financial lessons you can pass on to them.
These tips are only the start. No matter your expertise, age, or net worth, there’s always more to learn about money. Use the opportunity of teaching your kids about financial literacy to learn more about it yourself!
April is financial literacy month. Here are a some resources to help start that “uncomfortable” money conversation.
- The Best Financial Literacy Books everyone should read. Important baseline information. Not too technical.
- Beyond The Basics – Written by Heritage Financial President & CEO, Sammy Azzouz. If you already know the financial planning basics, the fundamentals, and the mistakes to avoid, but are uncertain what comes next to build your wealth, this personal finance book is for you.
- Breaking Money Silence – Kathleen Burns Kingsbury, Wealth Psychology Expert, Author & Coach is on a mission to end the “Money Talk Taboo” through her books, podcast, and articles.
