We all know the American education system has a few gaps and it’s a parent’s or a guardian’s responsibility to fill it! Teaching your kids and grandkids about how to manage money and finances is an important part of making sure they’re on the right path. If not, you never know where their knowledge might come from and they could end up on the wrong path.
But how are you supposed to teach them about money? Surely, you shouldn’t terrify them with the dangers of falling into debt when they’re 10!
There are many clever ways for them to learn, though. Today we’re going to outline a few kid-friendly approaches for all age groups. By the time your loves ones become adults, they’ll be able to fend for themselves in the often confusing world of finances.
How to Teach Pre-schoolers and Kindergartners About Money
1. Use a Clear Jar to Save
Piggy banks are fun to use when you’re older for when you discover odd one-dollar bills, pennies, and quarters in your pockets. You stash them away in an opaque piggy bank and you don’t know how much money you’ve saved until much, much later.
Younger kids, however, need the visuals, not just the cool surprise of a stack of money at a later date. Using a clear jar will help them understand the value of saving up without making matters overly complicated.
2. Set an Example
Kids are far more aware than most people think. In fact, a study conducted by the University of Cambridge found that children start noticing money habits as early as 7. That means you have to be careful about how you handle your finances around them as early as that.
If you’re careful about finances early on and make sure your kids are aware of this, they’ll have a much easier time understanding more difficult concepts later on. They’ll also think back on the time where you decided not to splurge on something in the moment just so you could benefit from a little more money later.
3. Show Them That Stuff Costs Money
Children won’t really understand what you mean when you say ‘that toy costs $10’. To them, that doesn’t mean anything and they probably won’t care at all either. Instead of a lecture, teach them how to actually use money.
After they’ve saved up a little bit of money have them take it out of the clear jar themselves, then go to the store. Help them pick something that is worth their amount or less, then let them hand the money directly to the cashier.
Once you get home point out how the jar is a little bit emptier now. Having this experience will hit the nail on the head a lot better than a boring lesson.
How to Teach Elementary Students and Middle Schoolers About Money
4. Show Opportunity Cost
During elementary school, your kids should be able to make decisions and understand possible outcomes. If they run around and don’t pay attention to where they’re going then they’ll know there’s a high chance they’ll get hurt, right?
Because of this, you can begin teaching them about opportunity costs. Even if you’re willing to pay for a game or toy they want they should understand that if they get it now, they won’t be able to get something else later, like their favorite candy or a cute pair of shoes.
5. Give Commissions, Not Allowances
It’s important to teach your kids that money is earned. Later on in life, they’ll know not to expect handouts. This is also around the time they should learn to help around the house, so why not make the best of both worlds?
Give the kids money for chores such as taking out the trash, cleaning their rooms, setting the table, or mowing the lawn. It’s also a good idea to not restrict them from buying what they want with their money, though do make sure to use our previous point in a discussion about their next purchase.
Parents who take their money away or refuse to allow them to buy toys, games, foods, or whatever else they want might foster feelings of resentment between them and their children, so be careful when it comes to punishing them for getting in trouble! This is generally not considered a good solution. If the child has done anything to deserve a time out, don’t take away the money they’ve earned.
6. Avoid Impulse Buys
Around this age, kids will become prone to impulse buying. It’s your duty to teach them a little bit of self control when it comes to their own money. Sure, they might have enough to buy whatever it is they want to buy but should that be the sole reason behind their purchase?
Ask your kids to wait at least one day before making a decision. If they want the item just as badly as yesterday then they’ll know if it’s worth it or not. Note that this doesn’t mean you should stop them from doing it if they ultimately decide to go through with the purchase. You’re supposed to teach them that they are the ones in charge, even if it comes to their impulses.
Try to do this with anything that costs more than $15.
7. Stress the Importance of Giving
If your child stays on top of their chores then they’ve probably saved up a nice little amount of cash. That’s great! They can probably spend it all in one go.
But this is the age where kids should learn about the gift of giving. They’ll learn more about sharing and how to care and empathize with others. Ask them about what feels important to them and research some local charities. Involve them in the process, top to bottom, and they’ll learn a valuable lesson about helping those who are less fortunate than themselves.
How to Teach Teenagers About Money
8. Teach Them Contentment
You should be prepared for your kid to compare themselves to another way in advance! It used to be that they only caught a glimpse of differences in school or when visiting their friends’ houses. Nowadays, social media is one of the best ways for them to see what everyone else is doing and what they’re spending money on, not to mention how much.
If their friends get to drive big, fancy cars, they’ll want big, fancy cars too! If their friends get the newest model phone then why can’t they have one? All these things can eventually make them feel contentment.
It’s now time to teach them that they don’t need the newest, shiniest thing on the market to be happy. If their car is safe and can take them from point A to point B, then why get a new one? Explain to them that not everyone has the same means and that every family is different while stressing that you’re doing everything you can to make them happy.
9. Give Them the Responsibility of a Bank Account
Ready to take money management and responsibilities to the next level? Then it’s time to help your kid open up a bank account. Basically, this will be a step up from the clear money jar. The sooner they learn how to deal with banks the better.
After all, dealing with banks and accounts is a huge part of somebody’s life and you do not want them to enter into adulthood without a clue.
10. Get Them Saving for College
Let’s be honest, college is not cheap at all. Even if you are able to help them financially, it’s still important for them to have a stake in the game as they contribute towards their own education.
If they haven’t had a job so far then this is the perfect opportunity to teach them about this responsibility. If they don’t plan on working a summer job, sit down with them, and let them know about the benefits of one.
11. Teach Them to Steer Clear of Student Loans
Student loans should be a last resort, and you need to explain this to your kid early on. If they plan on furthering their education then they shouldn’t rely on student loans. Take your time to explain how debts work, how long it might take them to pay them back, etc.
Just make sure you discuss alternative methods of payment early on. They should have ample time to start working summer or part-time jobs. They should have enough time to bring up their grades and focus on their studies if they want to aim for a scholarship. But also don’t forget that community colleges and in-state universities are also good choices and they shouldn’t look down on them!
12. Teach Them the Danger of Credit Cards
Financially minded people don’t need to fear credit cards, but your child might not be aware of their dangers just yet. The moment they turn 18 they’ll be hounded by credit card offers and it’s your job to teach them the pros and cons of having one.
By now they should know the dangers of falling into debt if you’ve followed our previous steps. Continue educating them on the topic by talking about credit cards, credit scores, and how they’ll affect their future unless they’re not careful.
13. Get Them on a Simple Budget
Adults who have never had to stick to a budget plan before will have a hard time doing so later on in life no matter how important it is for their financial future. The sooner you start, the better.
You have to teach your kid about budgeting and how beneficial it could be. It doesn’t have to be a massive plan. They don’t even need to have a big income for you to consider this. Remember, the important part is that they learn, for now.
The best part of this step is that there are a ton of great budgeting apps out there that will make the process easy to follow.
14. Introduce Them to the Magic of Compound Interest
Teens aren’t great at planning for the future, especially when it comes to money. So we know that teaching them about compound interest will be difficult, but it’s worth it. Don’t just stick to a lecture, though. Help them actually invest in something even if you’re starting off with a smart amount of money.
Every once in a while, sit down with them and show them what the market is doing. If you help them get used to this idea early on then there’s a big chance they’ll start investing ‘real money’ as early as their twenties. If they do, they’ll be set for life if they stick to their plan for as long as possible.
Just think about it. This small lesson could help them set their retirement savings up earlier than most people.
15. Help Them Figure Out How to Make Money
When not in school, teens actually have a lot of free time. Sure, they should enjoy this freedom for as long as possible, but it’s equally as important for them to start working. Those who start working later on in life will have a harder time adjusting to the shift in schedule.
You should at least encourage them to get seasonal or part-time jobs. But what about taking it to the next level? If you teach them to become an entrepreneur it could be just the push they need to become successful without relying on a 9 to 5 or a huge bank loan.
Teaching kids about money starts early, so make sure you begin implementing small lessons here and there early on. What are some ways your own family taught you about finances? What were some lessons you wish you would have been taught earlier?
Let us know in the comments down below and share tips on how to make kinds pay attention to money!