There are very few things that compare to the joy of seeing your children be financially successful as adults. If you want to lead your kids to financial success later in life, it is ideal to teach them smart financial behavior early in their lives. It’s great for children to learn about traditional subjects like history, language, or the arts, but it’s costly to overlook their financial education. Teach money to your children as early as you can.
Financial Education—Starting Early
These days, early education schools don’t spend enough time teaching our children how to handle money. You can teach your kids the financial lessons now that most students will only discover in college. It’s sad, but finance is complex to most adults because they get a late start on learning the basics of money. You don’t have to let your child wait for their financial education. Teach your kids the following-financial lessons now:
1. Starting a Coin Collection
Part of the art in saving money includes the feeling of owning something that grows. My children have always been obsessed with coins. Start your kids young with a coin collection by collecting pennies, nickels, dimes, and quarters. On a daily basis, allow your children to take leftover loose change and put it into a jar for safekeeping. This will show them the power of saving over time, as they see the jar fill up. At the end of each year, take your kid(s) to the bank to deposit the change. I personally use TD Bank for this, since they advertise this service with a handy dandy change counter in each of their branches. Each year they will see their bank account grow, and as they get older they can also deposit cash or checks they receive along the way.
2. Giving Children Bi-Weekly Assignments
You can also give your children an allowance for the work they do around the house or yard. Paying children motivates them to help you clean up the house, but you can be selective about how much you pay and for which tasks. The perspective you want your children to develop is that their labor has value. Financially, you want your kids to believe they’ll be rewarded for being innovative. In my house, certain chores are required for our kids, but when they go above and beyond they can earn monetary rewards as well. Do what works best for your family, the main point is incentivizing kids to understand the value of hard work.
3. Giving Your Kids an Option and its Substitute
As your child saves coins or earns money, you can build on their financial education by giving them options for how to spend their earnings. Instead of letting your kid buy a video game or doll alone, give them what they want alongside a substitute. Take the child to a store, and show them a substitute or different options for the things they want. You can explain to your kids that they might miss out on something better if they quickly go buy the first thing they wanted. In my house, we have created a system where a certain percent goes into long term savings at the bank, a certain percentage of their hard-earned money goes to charitable causes, and the rest can be spent as they wish (within reason). A child’s final choice can be theirs, but if you teach your kids to look at finances from the perspective of options and substitutes, they will build better skills in the long run.
One final point on teaching your kids about money. Every family has different circumstances and needs and financial situations. Adjust the tactics above or add to them as needed to tailor a plan that fits your family and children best. Every family will handle things differently, and the above is just meant to be a starting point for ideas that can be used in the real world.
This blog/website is only made available for educational purposes. It is designed to give visitors general information and a general understanding of select financial topics. It is not intended to provide specific financial or investment advice. Conduct your own due diligence or consult a licensed financial advisor/broker before making any and all financial/investment decisions.