Many adults find themselves struggling to understand their finances after realizing that they didn’t learn much about them in school. Personal finance is a tricky thing to teach, especially since the ways that we address it tend to change pretty quickly. Not long ago, schoolchildren learned how to fill out a check and balance a checkbook. But between then and now, most people have shifted to online banking and Excel spreadsheets for finance tracking.
Instead of hoping that your kids will grow up and figure it out along the way, why not give them a really solid head start? When they’re running around in the yard and begging for five more minutes of TV time before bed, budgeting basics may be the last thing on your mind. But it’s never too early to start teaching your kids how to manage their money. You’ll be glad you did later, and so will they. It’s time to give them the head start that you wish you had.
Piggy banks are a friendly and accessible way to teach your young kids what it means to save. The only problem with traditional piggy banks is that they can’t see inside of them to watch the money accumulate. Kids are very visual, and seeing their loose dollar bills and change add up will be much more exciting than just listening to them drop inside.
Try using a jar that they can see into instead of a colored piggy bank. Be enthusiastic as you watch the money grow together. They’ll remember this feeling as they upgrade to a wallet and then to a bank account. In a world that’s more plastic than paper, it’ll also help them understand how important it is to know how much money you have available and avoid building credit card debt.
Studies show that routines and habits are established by age nine. This includes things like household responsibilities, eating habits, and money routines. If there are things in these categories that you’d like to be firmly established before they hit double digits, it’s better to show rather than tell. From day one, your kids will be watching and mirroring your behaviors and habits. Now is your chance to lead by example.
Avoid impulse purchases, show them how you keep track of your money or pay bills, and avoid having heavy financial conversations (lighter ones are fine) in front of them. As they get a little older, you can upgrade to tasks like creating a budget and building an emergency savings fund. If you set healthy examples for them early on, they’ll be more likely to make a lasting impression and keep them on the right track as they get older.
The piggy bank isn’t the only visual that’s important when teaching budgeting fundamentals to your elementary-aged children. Instead of just telling your child how much something costs, try to pay in cash and show them. When they’ve accumulated enough money to buy candy or a toy, pull the money from their jar, count it out with them, and bring it to the store for them to hand to the cashier. Making it physical and visual will be more impactful than a verbal explanation as you skip over all of the other steps. They can see how money works from start to finish.
As they start to get a little older, you can teach them how to weigh financial decisions and understand the potential outcomes. If they’ve picked out two toys but only have enough money for one, show them that there’s enough money in their jar to take one thing home and help them choose. Explain that there’s enough money for one now, and as more money accumulates, they can come back for the other toy later. Rather than expecting a blanket “yes” to every request they make in the store, this will teach them that money does run out, and sometimes you have to choose what’s more important to you.
Since habits are generally locked in by age nine, now is a great time to combine budgeting fundamentals with household tasks. Develop an allowance system that relies on them accomplishing tasks like taking out the garbage when it’s full, cleaning the living room, or helping with the dishes rather than just handing them money each week. It’s never too early to learn that money is earned. Plus, this is a great way to spend additional time together and help them build healthy habits in other areas that they’ll carry with them into adulthood.
Giving back is an important part of personal finance. Ask any personal finance expert, and they’ll likely tell you that they have a line item in their budget breakdown for charitable giving. As your child’s birthday, holiday, and allowance money accumulate, take the time to teach them about giving back. You can decide on the amount based on your (or your child’s) preferences and help them pick a charity, someone local who’s down on their luck, or another avenue. They’ll grow up understanding how giving affects both the recipient and the giver.