FINANCIAL ADVICE | managing your money
How to Teach Your Kids Financial Responsibility
Published February 11, 2019
- Kids won’t be able to learn about money if they don’t have any.
- Important to teach kids that they will be rewarded for hard work.
- Encourage them to keep saving and promise them a prize.
It’s never too early to start talking to your kids about money. Teaching children strong financial habits early on will help set them up for success later in life. But how exactly do you go about building those habits? Here are some tips for teaching your kids financial responsibility.
Give them an allowance
Kids won’t be able to learn about money if they don’t have any. After all, practice makes perfect. Giving your child an allowance helps them take ownership over their finances and feel more responsible because the money is truly theirs. This emotional connection is important because it’s a lot easier to spend money that isn’t yours. With an allowance, they’ll be able to experience the benefits of good financial management along with the consequences of foolish spending. Sometimes experience is the best teacher, and it’s better to learn the negatives of poor financial management while the stakes are still low.
Teach the value of hard work
When your child is old enough, give them the opportunity to earn money by going above and beyond their normal routine. Perhaps you give them money for helping with chores around the house, getting good grades or just choosing to turn off the screens and read a book for an hour. Whatever you decide on, it’s just important to teach kids that they will be rewarded for hard work. It’s a vital life lesson that goes beyond finances, and it’s a lesson best learned at an early age.
Make them save
Kids aren’t good savers. They will spend money as soon as they have it. But that’s why you’re teaching them these lessons, and it’s also why you’ll probably have to force them to save. Whenever they come into some money — whether it’s through an allowance, a check for their birthday, or a job — make them put a percentage into their savings. This will teach them not to spend money as soon as they have it, which will prove a vital lesson as they get older.
Keep their savings visible
Piggy banks are cute, but because they literally keep money in the dark, they aren’t very effective in teaching kids about saving money. To help your young child visualize their savings, ditch the piggy bank and use a clear jar instead. Being able to see the money pile up when they save and go down when they spend will help them understand what money management really means. Encourage them to keep saving and promise them a prize — or better yet, a bigger jar — when they fill it all the way up.
Open a bank account
When your child is old enough to graduate from the piggy bank, it’s time to step up to the real thing. Opening a bank account for your child is a crucial part of their financial education and will help establish a foundation for future financial responsibility.
After you’ve opened the account, teach them the basics of how the account works, like how to make a deposit and withdrawal. Let them practice interacting with the teller so they get comfortable with the practical aspects of money management. If you’re concerned your child may just empty the account, don’t worry. Most kids savings accounts offer joint ownership for parents so you can control the account until your child has learned enough good habits to manage their money on their own.
The Credit Union of Texas offers multiple savings account options designed specifically for kids. If you’re interested in opening an account for your child, contact us or stop in at any of our locations. We want to be your partner in teaching financial responsibility, so we’d be happy to help explain how a credit union works and answer any questions your child may have about their money.
Piggy banks and allowances are tried-and-true methods of teaching financial literacy. But if the old ways of doing things don’t seem to be connecting with your 21st century child, it may be time to upgrade your approach. These days, there’s an app for everything, including teaching your child about money. Apps like Savings Spree, Bankaroo, and FamZoo offer fun games and other interactive features that make finances more fun and engaging. If children actually enjoy what they’re learning, the lessons are more likely to stick.
Some apps are designed to teach younger children the basics of money management, while others are geared toward older children to teach them about more advanced financial strategies and products. Read reviews, test the apps yourself, and find one that’s right for your child.
Set a good example
Whether it’s finances or anything else, children learn by copying the people around them. So, if you’re practicing good money habits, they’ll be more likely to develop those habits too. Consider your own attitudes about money, how you pay for things and how you can demonstrate sound financial responsibility. Ask your child to “help” you pay your bills so they understand what that process looks like and explain to them why it’s so important. Also, think about how you talk about money in front of your child. Kids understand a lot more than most people realize, so just be sure you’re teaching good lessons even when you’re not trying to teach.
Every child learns differently, so as you teach them about financial responsibility, try to use a combination of the methods listed here. Some children may respond better to an app, while others may benefit from physically seeing their money in cash. Above all, continue to talk to your child about money and help them practice good financial management as they grow. Financial responsibility is a lifelong skill, and the earlier they can learn good habits, the better off they’ll be.