By Darrell Bryant
If you have children, you know that you need to teach them about how money works, including how you use money, how you earn money, and how saving in a bank account or through investment accounts can help build your money over time. However, it’s also important that you pass down your values around money. Why is it important for our family to save for the future instead of spending everything we make? Why do we choose to use some of our money to help the less fortunate?
Regardless of their age, remember, your kids are watching what you do. If you’re always buying new toys for yourself, complaining about your credit card bill, or rushing to spend a tax return or other windfall as soon as you receive it, you’re teaching them that spending money is more important than saving. On the other hand, if you talk about waiting for items to go on sale before buying them, putting away some of each paycheck, and why you save and invest for future goals, your children will pick up on those good financial habits.
Teaching money lessons to your children should start when they are young and continue into their adult years. Below are some of the important lessons to pass down and when to teach them.
Money Lessons For Young Children
If you think your child is too young to understand financial matters, think again. Researchers have found that by age 4, kids understand that money can be exchanged for goods, and by age 7, they understand spending and saving and are already forming their own financial habits. (1)
At this age, it’s important to make the abstract concept of money applicable to their lives. Show them coins and bills and explain how they add up. Give them examples of how much they can earn for doing certain tasks and then compare that to how much it costs to buy a toy they’ve been eyeing. This will show them the value of money and the work that it requires to earn that money.
Another important concept to start teaching your preschool and kindergarten-aged kids is that “good things come to those who wait.” Help them choose a financial goal, whether it’s buying a new stuffed animal or LEGO set, then show them how to get there, one step at a time. Make it fun and do things alongside them, encouraging them when they lose motivation.
Money Lessons For School-Aged Children
At this point, your children can understand more complicated money concepts. Though you likely don’t want to tell them all the details of what you earn and spend, consider sharing some basic expenses or bills you have so your children see where your money goes, and why you don’t always have extra money to spend on games or trips.
If your kids receive a financial gift, such as birthday money from a grandparent, teach them how to save some of the money today so they can make a bigger purchase in the future, such as a bike or video game system. If you’re able to and willing, you can offer to match their savings or pay interest to bring them closer to their goal.
Money Lessons For Teenagers
If you’ve taught them since they were young, by the time your child reaches their teenage years, they should have a solid foundation in money management. But your job isn’t done yet—there’s still a lot left for them to learn!
The most important thing you can do is to allow them to struggle, to want, to earn, and to pay. If you haven’t already, make sure to open a checking and savings account for them and teach them how to log in and check on their account, deposit money, and transfer funds between accounts. Show them how interest works and pass on the ever-important lesson of the power of compound interest (and how their savings can snowball if they start early).
If possible, encourage your teenager to get a part-time job and pay for certain expenses, such as gas for the car. Once they see how quickly their hard-earned money flies out of their hands, they may be more careful and diligent with how they handle their money.
Lastly, don’t forget about teaching them about credit. You might think credit cards aren’t for kids, but if you don’t teach them how to use credit cards wisely, who will? Before you release them into the “real world,” they should understand that they can only spend what they have. If you open a credit card for them while they’re living with you, you can train them to build credit while paying off their balance each month.
Start Teaching Them Today!
An experienced financial professional can help ensure you’re passing down your values around money, as well as the personal finance basics your children need to know. If you would like our help in discussing money and the future with your family, we at D. Bryant Retirement Strategies are happy to help. Call us at (402) 932-2141 or email firstname.lastname@example.org to schedule a complimentary consultation.
Darrell Bryant, CFS®, CAS® is Omaha’s Retirement Strategist. As the founder of D. Bryant Retirement Strategies, he focuses on helping individuals and couples nearing retirement do so successfully. Along with more than 30 years of experience, he received the Certified Fund Specialist (CFS®) designation and a Certified Annuity Specialist (CAS®) designation from the Institute of Business & Finance. Passionate about helping as many people as possible in his community, he hosts Retirement Strategies Radio, heard Saturday mornings at 8:00 a.m. on 1110 KFAB. He has also written articles on financial planning that have been featured on Fortune.com, FoxBusiness.com, Money.com, and in the Midland Business Journal. To learn more, visit his blog, his website, or connect with him on LinkedIn.