Most parents don’t teach their children about money. That is a shame because financial literacy is one of the most important life skills a person can have. Here are 20 ways you can teach your child about money:
1. Start early.
Teaching children about money should start when they are young. Even toddlers can learn to save their money in a piggy bank.
2. Explain the value of money.
Children need to understand that money doesn’t grow on trees — it has to be earned.
3. Teach them the importance of budgeting.
Explain how important it is to track their expenses and make sure they don’t spend more than they have. Help them create a budget. Work with your child to create a budget that outlines how much money they can spend each month on various items.
4. Show them how to spend wisely.
Teach your children how to compare prices and find the best deals before they make a purchase.
5. Teach them the difference between needs and wants.
Help your children understand that they don’t need to have the latest and greatest toys or gadgets — they can be happy with what they have.
6. Help them set financial goals.
Encourage your children to save up for something they really want, like a new toy or a trip to Disney World.
7. Encourage them to start earning their own money.
Kids can start earning money by doing chores around the house or yard work for neighbors.
8. Encourage them to start a business.
Help your child start their own business by giving them a small loan or investing in their venture. Show your children how they can become their own boss by starting their own business.
9. Help them open a savings account.
Once your children start earning money, help them open a savings account at one of your local banks or credit union. Encourage them to save money for a rainy day. Help your children set aside money each month in case of an unexpected expense.
Explain the concept of compound interest. Help your children understand how saving their money now will make them richer down the road.
10. Show them how to invest their money.
Saving and investing are two important but different concepts that children need to understand. When you save money, you are putting it aside for a future goal. This could be for a rainy day, for retirement, or for something you want to purchase in the future. Investing is when you use your money to purchase something that will grow in value over time. This could be stocks, bonds, or a piece of property.
11. Help them open a custodial account.
If your child is younger than 18, you can help them open a custodial account at a bank or credit union. A custodial account is an account that is opened for a minor child and is controlled by the adult who opens the account. The adult can use the account to save money for the child or to invest in stocks, bonds, or other types of investments.
12. Teach them about the stock market.
Introduce your children to the world of stocks and explain how they can make money by investing in stocks.
13. Discuss retirement planning.
Talk to your children about saving for retirement and explain how important it is to start saving early.
14. Discuss the dangers of debt.
Teach your children about the dangers of using credit cards and taking out loans they can’t afford to pay back.
15. Explain the difference between debit and credit cards.
Show your children how debit cards work and explain the dangers of using credit cards for buying things they can’t afford.
16. Teach them about financial scams.
Show your children how to spot a scam, and explain how important it is to never give out personal information like Social Security numbers or bank account numbers.
17. Explain the importance of insurance.
Teach your children about the different types of insurance — like health, auto, and homeowners — and explain why it’s important to have coverage.
18. Introduce them to philanthropy.
Show your children how they can use their money to help others in need. Explain that adults can also benefit from doing this by getting tax deductions.
19. Lead by example.
The best way to teach your children about money is to lead by example. If you’re responsible for your finances, they’ll learn to be responsible with theirs.
20. Let them make mistakes.
Allow your children to make financial mistakes, so they can learn from them. Just be there to help them pick themselves up and get back on track.
In conclusion, teaching children about money is one of the most important things parents can do to help their kids be successful in life. By starting early and teaching them basic financial concepts, you are giving them a head start on a lifetime of wise money management.