Parents today are determined to make sure their children get a head start on their financial future by learning the skills the will need to succeed. But not everyone is comfortable talking to their kids about money. Maybe their parents never talked to them. Or they are still learning themselves, and don’t feel they are in the position to teach essential financial lessons. Here are some expert tips to help:
Teach children how to make money decisions
A key aspect of personal finance is knowing how to make choices with money. This can be taught by giving kids small amounts of money and allowing them to choose how to spend it, says Carrie Joy Grimes, a personal finance expert and founder of WorkMoney.
“I gave (my daughter) enough money that she could make choices with it. So she learned early on that she had enough she could save up for something, so she could say no to things and say yes to other things,” said Grimes. “Learning to say no, learning to hold money to yourself for long enough to get the thing you want, it’s a really hard skill.”
When giving children the opportunity to choose, it’s crucial parents don’t impart judgment on their decisions, said Bobbi Rebell, consumer finance expert at BadCredit.org, a personal finance website. Framing choices as personal preferences rather than right or wrong answers will build children’s confidence in their decision-making process, she said.
Parents can find free financial literacy worksheets for children from Hands on Banking, a free financial education service by Wells Fargo.
Teach how to set financial goals
For many children, their first access to money is through an allowance. Whether it’s saving for a new video game or a bicycle, setting a goal for their money can be a good way to teach children the value of saving.
“Recognizing the progress, seeing how close they’re getting to the goal, visualizing the end goal, and then really celebrating when they achieve that goal can help them learn that when they can make small financial goals a reality,” Seitz said.
Tip jars can be an analog way to track progress, Pettway said. Encourage your child to add a portion of the money they receive to a “savings” jar, an “investing” jar and a “giving” jar. As children see their jars getting full, they begin to be motivated to continue adding money.
It can also be beneficial to make children active participants in future plans, recommended Lindsay Bryan-Podvin, financial therapist and founder of Mind Money Balance, a financial wellness service. If, for example, your child wants to go to an expensive sports summer camp, encourage them to save a portion of the cost from their allowance or summer job.
Allow them to make mistakes
It’s inevitable that kids will make mistakes while learning about money. These can be approached as opportunities to learn important money lessons that will be useful for their future, Rebell says. However, it’s important that you let your children make the mistakes rather than solve issues for them.
“If you constantly bail them out, they’re not gonna learn to manage it,” Rebell said.
Bryan-Podvin also recommends that you avoid responding to mistakes in a negative way. Showing intense frustration or anger can hurt children’s trust and make them feel like they cannot turn to their parents when they make normal mistakes.
“Help them learn how to manage their emotions, help them think about how they might do things differently,” she added.
Get creative
Money can often seem boring, so making it fun, engaging, and entertaining can be the key to keeping your children’s interest alive. For example, when shopping for things like school supplies, Corum chooses an appropriate amount from her own budget for her daughter to decide which items she wants. However, when shopping for toys or other non-essential items, Corum gives her daughter a portion of her allowance or other extra money she might have from special chores.
Corum gave her children debit cards and uses a family personal finance app connected to the cards to distribute their allowances and monitor their spending. Her children have access to their debit cards through their own app portal where they can see their spending, save, invest and learn more about personal finance topics.
The most important thing, experts agree, is to talk about money openly and often with your kids. Reaching adulthood without having developed strong financial skills can really cost them. For tips on ways to incorporate the topic into everyday conversations, read the full article here.