Raising Financially Savvy Kids: A Guide for Parents

Being a parent is a full-time job — and it’s not an easy one, either.  In addition to providing basic necessities such as food, shelter, clothing, and so on, parents are also  in charge of teaching life lessons and generally helping kids grow up to become good, caring, and responsible adults. 

And while there’s no single “right” way to raise kids or teach them those life lessons, there is one thing that I think everyone can probably agree on:  When it comes to money, it’s important for parents to be good role models for our kids.  After all, our kids learn by watching us, so our finance-related habits and attitudes will definitely shape the way they handle money. 

It’s never too early – or too late – to start teaching your kids about money.  Here are a few things you can do to help your kids build healthy money-related attitudes and habits:

Get started early.  While your six-year-old might not be ready to sit down and create her very own budget spreadsheet, she is old enough to grasp some basic concepts, like saving, spending, and understanding the difference between “needs” and “wants.” 

Help them save.  Any time is a good time to start teaching kids about the benefits of saving money.  Help younger kids and pre-teens set savings goals, such as saving up for a specific item they want to buy (for younger kids, start with something realistic – a goal that’s too far off might get discouraging after a while).  If you’ve got older teens, help them choose a savings account and start teaching them about concepts like interest.

Talk to kids about your finances.  When your kids are old enough, make it a point to involve them in some of your financial discussions and decisions.  Discussing things like your family’s budget and savings goals can help them develop realistic ideas about living within your means.  During these discussions, be realistic, honest, and specific.  Let your kids ask questions.  When you explain your decisions, try to say things like, “Purchasing XXX isn’t a big priority for us right now” or “We’d like to buy XXX, but we need to save up the money first” – explanations like that send a better and more honest message than “We can’t buy that.” 

Model good money habits. It’s not enough to simply talk about financial responsibility – if you really want your kids to develop a good, healthy relationship with money, it’s important that you demonstrate good money habits, too.  If your kids see you breaking out your credit card any time you want something, it’s safe to assume that they’ll do the same thing as soon as they’re old enough to have plastic of their own.  On the other hand, if your kids see you saying things like, “I’d like to buy this, but it’s not in the budget right now,” or “I like this, but I don’t think this is worth the money,” it’s likely that they’ll grow up with a more realistic idea about spending.

Encourage them to earn money.  Letting kids earn money is a great way to help them learn about saving and spending.  If your kids are younger, consider giving them a few jobs around the house that they can do for extra cash.  Remember to keep things consistent:  Decide ahead of time on an amount that you’ll pay for the job, and establish a regular “payday” (and remember not to pay them unless they do the work!).  Older kids and teens can earn money doing things around the neighborhood – like babysitting, raking leaves, or shoveling snow – or by working part-time jobs.  No matter how old your kids are, help them get in the habit of “paying themselves first” by setting aside a set amount of money in savings.

Of course, this list is just a start:  Your kids aren’t going to learn about money overnight, and there may be a few mistakes or frustrations along the way – especially as they get older and their list of wants gets more complicated.  But if you start early and act as a good, responsible role model, you’ll help your kids build a solid financial foundation that will last a lifetime.