Train your kids to be successful with money
January 15, 2020
- Everyday spending opportunities to teach your kids about personal finances
- Free money management tools for children
- Kid-friendly budgeting apps
Kids form money habits by age seven. If cursing in front of your children could give them a sailor mouth by kindergarten, then never talking about personal finances could make them think money grows on trees by the time they graduate high school. That’s a bad recipe for racking up debt.
Teaching your kids the basics of managing money doesn’t have to be complicated when you use everyday occurrences as learning opportunities. Withdrawing funds from an ATM, paying for groceries with a credit card, leaving a tip at a restaurant, paying cash for gas, or saying no to an impulse buy are perfect opportunities to talk to your kids about finances.
Tips for teaching your kids how to manage money
To spend, save or invest money, you have to make money first. Show your children the full life cycle of personal finances, which starts by earning a Paycheck.
Give kids an allowance for doing chores around the house so they understand the joy of making your own money and the desire to earn more. If they want a toy from the store, a new game, a jar of candy, or something more expensive, it’s up to them to decide whether to spend or save. Teach them the act of wanting something and having to save for it, or go without. This is a valuable lesson that could prevent them from racking up debt later in life or wasting their entire Paycheck on unnecessary purchases. It’s also a great opportunity to help them realize that you can save faster if you work harder and find other ways to make money outside of an allowance (enter lemonade stand cliché).
Next, set up a checking account for them and teach them the act of depositing money, checking their balance, withdrawing funds, saving, etc. A simple introduction to banking will teach them that money doesn’t just grow on trees. Consider a savings account as well as a checking account so they understand the difference.
Talk to them about your own finances. Kids are curious… if you’re buying a home, a car, or going on a family vacation, talk to your children about how you paid for it or financed it. You don’t have to explain a 50-page mortgage document, but you can discuss what a mortgage is, how to save for the deposit, and what monthly payments mean. The simple act of talking about your personal finances will make your children intrigued to know more.
A basic budgeting app is a necessity for kids, given that they’re likely playing games on a smartphone or tablet anyway. There are many budgeting apps that will teach them concepts like deposits, withdrawals, saving and interest. On some budgeting apps, you can connect your bank account and send your kids their allowance electronically. And voila, now they know what direct deposit means.
Sign up for a joint credit card when your kids are old enough, to show the importance of avoiding credit card debt. Credit cards are the easiest way to introduce your children to a credit score. Explain that using a credit card and paying it off each month will lead to a high score, which will help them buy their own home or car someday. Let your children use a credit card for small purchases, monitor their use, and show them how to pay the bill or set up automatic payments. This simple act will show them how to have a good credit score.
Let them make mistakes. Mistakes are life’s way of teaching us important lessons, and it’s no different for kids when it comes to managing money. If your child wants to waste all of his/her allowance on candy, let them. Then, look for an opportunity to say “if you had only saved that money instead.”
Free money management training tools for kids
- Budgeting app for kids: what better way to disguise money management training than as a game on your phone? The next time your kids ask to use your phone to play games say yes and send them to one of the many personal finance apps for kids.
- Financial literacy apps: your kids won’t understand their finances if they don’t know the right words. Rest assured, they’re not learning about money market accounts in public school… so why not teach them the right terminology using fun apps.
- Interactive websites to practice money skills: what kid doesn’t love online games? Instead of letting them waste time playing frogger, let them play animated games like Rich Kid, Smart Kid.
- Online and board games for kids to learn about money: monopoly is a family favorite, and it teaches kids how to manage money more than you might realize. There’s ChangeMaker, an online game that helps kids improve their math skills, plus other online sim games and role-playing games that can teach them how to manage funds.
Simply talking about your personal finances and introducing your kids to the concept of making and managing money will go a long way when it’s their turn to earn a Paycheck.