Good money habits are one of the most important things parents can teach their children. The tricky question is, how?
A new article in Wall St. Cheat Sheet outlines simple steps that parents can take to start teaching kids the value of money from an early age. The key is to keep each lesson simple and convey it in relatable terms.
Here are three of the best tips:
1. Make your kids work for their money.
Once your child is old enough to understand what money is (maybe age 4 or 5), it can be useful to give them a small allowance. This could be anything from $0.50 to a few dollars a week and will give your child a small amount of money to be financially responsible for. Better yet, you can link the allowance to chores — they’ll learn that money is something they earn, not something they automatically get.
2. Teach your children to save.
Saving can be a hard concept for young children to grasp, so it’s important for parents to encourage them, Wall St. Cheat Sheet explains. For example, if your child wants a LEGO toy that costs $10 but only gets $2 a week, you could explain that it will take them five weeks of not spending to have enough money to buy the toy. You can also show them a cheaper toy and compare the required weeks of saving for each.
Another method of encouragement is to offer to match your child’s savings for a good investment. “If you do this, make sure to explain why the investment is a good one,” the article notes. “When they are older, you can also encourage them to start putting some of their money in the bank or set a specific weekly or monthly requirement.”
3. Set a good example.
“Most younger children enjoy emulating their parents, so if they see you saving, they will also want to save,” Wall St. Cheat Sheet writes. To do that, you can talk about money in front of your kids or let them see you putting coins and dollars into your own piggy bank. Other options include letting your kids compare items at a supermarket and explaining why it can be cheaper to buy items in bulk than individually.