*contributed collaborative post
Parents want the best for their kids, so it’s only natural to want children to be financially healthy. Since eight of every 10 Americans are in debt, the fear that kids will struggle with future bills grips many parents. But most are in the dark as to how — and when — they should start talking to their kids about money.
It’s never too soon to start instilling healthy financial habits in kids — the sooner, the better. Children as young as 3 and 4 years old can understand what money is and how people use it. Perhaps more surprisingly, the money habits kids take with them into adulthood are set by age 7.
Sound financial habits are one of the most important life skills a kid can have. These six tips explain how to help them successfully navigate the world of finances — and maybe even enjoy it.
Talk About Money
The best way to help a young child understand money is to talk about it. Play with it. Count it. Read age-appropriate books about it. Get little ones to identify what money does and why it’s important.
Young kids love to play pretend, so some parents use their natural curiosity and imagination to teach them financial skills. An imaginary store in the living room is the perfect opportunity to show kids how they can exchange money for goods and how certain items might cost more than others.
As older children get a better grasp of what it means to make and spend money, parents can use real-world examples to talk to them about their spending habits. Some people pull out their checkbook or the last grocery bill to explain how much different items cost and how kids can play a part in helping the family save.
Take Them Shopping
Most kids first encounter money during family trips to the store. What better time to get them involved? Parents can spend a day at the grocery store or mall giving their children a first-hand glimpse into financial management with activities such as:
- Pointing out price tags to explain how much things cost
- Using a calculator to keep a running total of purchases
- Tracking coupons
- Discussing store brand versus name brand items
- Identifying overpriced products and finding cheaper alternatives
Older kids might even find it exciting to take charge of the grocery shopping while trying to stay under a specific budget.
Help Them Manage an Allowance
The internet offers plenty of conflicting information on allowances — some experts believe parents should give children an allowance after completing household chores, while others say they should provide one unconditionally. Meanwhile, others think adults shouldn’t give them at all. But perhaps the best strategy is to give kids an allowance along with discussions about household budgeting.
Adults can encourage their kids to earn money through housework and then talk to them about this exchange, as well as the value of the money they receive. Together, they can put aside money into savings each week and decide how to use the rest the most wisely.
Set Up a Savings Account
Once a child has their own money, they’re often more interested in learning how to manage it carefully. A savings account can be a great tool in helping them monitor their money and teaching them delayed gratification.
Parents can open a savings account early and encourage kids to watch the activity over the years by putting savings from allowances into the account. They can use account statements to explain interest and help kids learn how taking out money for small purchases means it’s gone for good, leaving less for more significant investments later on, such as an expensive toy.
Encourage Older Kids to Work
As children age, parents can encourage their financial independence by helping them get a job. Adults should explain how kids can effectively use the money they earn. For example, they might spend it on non-essential purchases like video games, or they can save it for larger and more rewarding opportunities, like one day buying a car.
Kids can get outstanding work-for-pay experiences before they even enter the employment world. Building a lemonade stand, offering to mow neighbor’s’ lawns or babysitting for family friends all provide the opportunity for children to start their own small business and learn fundamental business concepts.
Lead By Example
Finally, possibly the most vital way to teach financial skills is to model good behaviors. Kids learn by watching and imitating, so all the great advice in the world might not help them if parents’ actions aren’t in line.
Adults should model great financial habits to their kids. These behaviors might include setting a budget before going grocery shopping, asking children to help clip coupons, searching online for the best deals and avoiding impulsive spending.
It’s Never Too Early to Implement Good Money Habits
Kids form money habits early, so parents should start instilling healthy ones even earlier. Fortunately, getting little ones interested in finances can be as easy as including them in the activities adults are already doing. Any parent can use these tips to instill financial skills that will last a lifetime.
Disclaimer: This post is sponsored by PSECU, a Pennsylvania-based credit union.