“Dad, I need some extra money to go to the movies with my friends.” If you are a parent, you’ve probably heard countless requests like this.
At some point your kids will discover they can no longer rely on you for all their financial needs. Because recent studies have found that teaching financial literacy is lacking in many schools, it’s up to parents to provide the fundamentals of finance to their children. Here are some concepts you can use to begin introducing your kids to the lessons of personal finance.
- Spend a little, save a little. Whether receiving a birthday gift or allowance money, teach your kids to get into the habit of saving a portion of what they receive. Help them create savings goals like the purchase of a bike or creation of a college fund.
- Don’t worry about what others have. Teach your children to avoid spending money to follow the crowd. Take a look at the unused toy bin to demonstrate the point. Chasing the need to own $200-$500 sneakers can lead poor financial habits in the future.
- Be money mindful. Remind your child to think before they spend money. Help them understand that wanting something doesn’t always mean that they need to have it. You can also help them to prioritize their spending. For example, saving for the running shoes your child might need for track may be more important than the money he or she would spend on a night at the movies with friends.
- Learning about finances is fun. Set aside some time each week to learn about a new personal finance topic together. You can help your child learn about checking accounts, setting up a budget, getting a small loan, or simple ways to start saving. Getting them interested in financial topics at a young age will help them throughout their lives.
- Tax talk. If your child is old enough to earn a paycheck, teach them tax basics. Walk them through their paycheck. Social security, Medicare, and withholdings are new concepts for them. Help them understand how the money is used. Don’t overlook other taxes as well. They also need to know that sales tax should be factored into the cost of items they choose to purchase.
It’s important to keep the conversation going. Encourage your children to ask questions, and get them involved with your household spending. There are many ways you can help them develop a healthy understanding of personal finance.