Pick up almost any parenting book and you’ll see plenty of valuable advice, everything from reading to your child, teaching them kindness and generosity, and building resilience and courage. But one thing most parenting books don’t cover? Money. That’s unfortunate because your child’s level of financial literacy could make or break their success in their adult years.
Your kids are going to learn about money from someone. Don’t you want that someone to be you? Teaching money lessons to your children should start when they are young and continue into their adult years. If you don’t know where to start, here are some tips!
Money Lessons For Young Children
If you think your child is too young to understand financial matters, think again. Researchers have found that by age 4, kids understand that money can be exchanged for goods, and by age 7, they understand spending and saving and are already forming their own financial habits. (1)
At this age, it’s important to make the abstract concept of money applicable to their lives. Show them coins and bills and explain how they add up. Give them examples of how much they can earn for doing certain tasks and then compare that to how much it costs to buy a toy they’ve been eyeing. This will show them the value of money and the work that it requires to earn that money.
Another important concept to start teaching your preschool and kindergarten-aged kids is that “good things come to those who wait.” Help them choose a financial goal, whether it’s buying a new stuffed animal or LEGO set, then show them how to get there, one step at a time. Make it fun and do things alongside them, encouraging them when they lose motivation.
Money Lessons For School-Aged Children
At this point, your children can understand more complicated money concepts. Though you likely don’t want to tell them all the details of what you earn and spend, consider sharing some basic expenses or bills you have so your children see where your money goes, and why you don’t always have extra money to spend on games or trips.
If your kids receive a financial gift, such as birthday money from a grandparent, teach them how to save some of the money today so they can make a bigger purchase in the future, such as a bike or video game system. If you’re able to and willing, you can offer to match their savings or pay interest to bring them closer to their goal.
Money Lessons For Teenagers
If you’ve taught them since they were young, by the time your child reaches their teenage years, they should have a solid foundation in money management. But your job isn’t done yet—there’s still a lot left for them to learn!
The most important thing you can do is allow them to struggle, to want, to earn, and to pay. If you haven’t already, make sure to open a checking and savings account for them and teach them how to log in and check on their account, deposit money, and transfer funds between accounts. Show them how interest works and pass on the ever-important lesson of the power of compound interest (and how their savings can snowball if they start early).
If possible, encourage your teenager to get a part-time job and pay for certain expenses, such as gas for the car. Once they see how quickly their hard-earned money flies out of their hands, they may be more careful and diligent with how they handle their money.
Lastly, don’t forget about teaching them about credit. You might think credit cards aren’t for kids, but if you don’t teach them how to use credit cards wisely, who will? Before you release them into the “real world,” they should understand that they can only spend what they have. If you open a credit card for them while they’re living with you, you can train them to build credit while paying off their balance each month.
Start Teaching Them Today!
An experienced wealth manager can help ensure you’re passing down your values around money, as well as the personal finance basics your children need to know. If you would like our help in discussing money and the future with your family, we at Anderson Financial Strategies are happy to help. Please call us at 855-237-4545 to schedule an executive briefing to discuss your goals.
Shon Anderson is president and chief wealth strategist at Anderson Financial Strategies, LLC with over 15 years of experience. As a fiduciary, Shon’s mission is to provide his clients with quality financial expertise along with rapidly responsive service through an honest relationship. He specializes in providing family office-style services to help his clients organize and focus their financial life. Shon graduated from Wright State University with a bachelor’s degree in financial services and an MBA in finance. He is a CERTIFIED FINANCIAL PLANNER® (CFP®) practitioner and holds the Chartered Financial Analyst (CFA®) designation. His insights have been quoted in leading financial news publications such as CNBC, Yahoo Finance, Fox Business, Consumer Reports, Forbes, Bankrate.com, Investment News, and Kiplinger. Shon serves as an adjunct professor teaching personal finance courses at Wright State University, leads CFP® exam review courses for Keir Educational Resources, and is president of the CFA Society Dayton. Shon and his wife, Jessica, reside in Sugarcreek Township, Ohio, and are blessed with triplet daughters, Elizabeth, Bridgette, and Alexandra, along with their son, Jacob, and dog, Jack. Over the years, Shon has been involved in several volunteer organizations including the Wright State chapter of Delta Tau Delta as an alumni adviser and was a Big Brother in the Big Brothers/Big Sisters program. To learn more about Shon, connect with him on LinkedIn.