One of the most important jobs of a parent or caregiver is to help children establish healthy habits that will prepare them for lifelong success. From catchy songs and rhymes that teach a toddler how to brush and floss their teeth correctly to reminding your teen for the thousandth time to wear their seat belt, parents play a monumental role in getting kids ready for whatever life throws at them. But are we, as parents, including essential lessons about money into the mix?
Here are 3 money lessons that every parent should teach their kids...
Lesson # 1
How to Work Within a Budget
Budgeting money is something that many people struggle with, particularly young adults. However, teaching this money lesson to your children helps them to build understanding of the concept, along with a confidence to do it successfully. It also allows them the opportunity to fail, if necessary, in an environment that is safe and carries little consequence in the long term. So what does a lesson in budgeting look like?
Here is an idea to help you get started:
Give your child an allowance, and then help them divide it into a budget. Many people like to allocate a percentage for saving, a percentage for spending on a need and then a percentage for spending on a want. Be sure to assist kids with making these calculations and then become their accountability partner.
Lesson # 2
How to Understand the Time Value of Money
If I asked you whether you would rather have a penny doubled every day for 30 days or a million dollars, many people would quickly pick the million dollar option. However, a little math would reveal that if you chose the doubled penny, you would net over 10 million by the end of the 30 day time frame. This fun exercise helps to demonstrate the importance of the time value of money.
For a very practical way to put this into practice with kids, consider this idea:
Open up an interest drawing savings account for your kids. Provide them with a seed deposit, or let them invest their own money. Each time they receive an interest payment from the bank, track it and discuss how the money is growing. Encourage them to add more and see it grow too.
Lesson # 3
How to Save for Something Big
Begin by explaining that many times we want to purchase something that we don’t have enough money to buy right now. In order to be able to buy it, we have to set back money in increments until we reach our goal amount. Depending on the age and interests of a child, walking out this lesson could take a few weeks or possibly years.
Here is a great way to apply this lesson:
Discuss a savings goal with your child to purchase something “big” they want to buy. Begin tracking the progress to the goal, discussing challenges and setbacks that occur along the way.
Eliana is the mother of two beautiful children, and a successful business owner. She understands that financial balance and strategy are part of her life in more ways than she can count. She does her very best to instill healthy money habits into her children every chance she has. Both of her kids help at the business on the weekends, receiving a small allowance for their contribution.
As a family, they have been working together to budget funds and save for a family vacation. While there have been moments of challenge, both children have persevered, sharpening their budgeting skills, watching their savings grow each month, and now reaping the rewards of their diligence.
Developing Skills for a Bright Financial Future
Every parent wants their children to thrive, and grow into healthy adults who are financially stable and secure. By taking time to incorporate these simple money lessons into your child’s daily life, you will be helping them build skills in a key area as they grow and mature.