As a parent, we all want the best for our children. Providing them with the skills and knowledge to navigate through life is one of the most important responsibilities of parenthood. This includes teaching them about smart money management. Children learn more about money from their parents than from financial education courses taught in school.
A 2018 Parents, Kids & Money Survey found that money conversations with parents are associated with better financial habits in adulthood. The survey also found that among the young adults that received financial education in school, 34% say they were more influenced by their parents than by what they learned in financial literacy courses. Only 8% said the courses had a greater influence on their financial habits and behaviors.
Here are six tips for teaching smart money habits to your kids.
1. Prepare in advance with free online resources. There's no need to take a college-level finance course before talking to your child about responsible money management. Select a topic and learn more about it from a reputable website.
For example, learn more about credit reports and credit scores by reading articles found on the websites of the three major credit reporting bureaus: Experian, Equifax, and TransUnion. Your financial institution might also provide free resources, such as blog articles, educational videos, and seminars.
2. Start early. Before you hand over a credit card or start giving your child a weekly allowance, have your first money conversation. Don't wait until they've already overdrawn their student checking account to talk budgeting.
3. Use real-world examples. Credit card statements, credit reports, and cash register receipts can help make your teaching come to life. If you'd prefer to keep your personal information private, download sample documents from credit reporting bureaus and credit card websites.
4. Set financial goals. Let your child experience the rewards of responsible money management for themselves. Brainstorm short-term savings goals with your child. Some might include saving for a special toy or a trip to their favorite store.
5. Make saving fun. Hang a picture of their goal on the refrigerator door. Add a sticker to the image each time your child makes progress towards achieving the goal. Keep them motivated by offering to match their savings dollar-for-dollar for 30 days.
6. Review financial topics often. Plan to revisit specific topics and introduce new ones as your child ages. The savings lessons you give your child at age five will differ from the ones they receive at age 17.
Lay the groundwork for a solid financial future by helping your child understand the basics of personal finance while they're still under your roof. The investment you make in teaching these valuable financial lessons today will pay dividends for years to come.