Kids need to learn about money, and they will most likely learn from their parents, for better or worse. Be sure you're practicing good habits and setting the right example. Here's what to teach (and what not to teach) your kids about money.
Teach Them to Earn
Kids need to learn what it means to earn money. It's one thing to receive an allowance. It's another to work in exchange for money. Give them chores and pay them based on what they accomplish and how well they accomplish it. If a chore is only partially completed, make sure they finish the job so they can learn that they need to fully do what they are being paid for. This will help to prepare them for later in life when they enter the workforce.
Teach Them to Save
Teach them about saving their money. Talk about why you place some of your money into a savings account, and why you don't spend your money as soon as you get it. Explain the concept of an emergency fund and why it helps to also build up your checking account. Make sure they understand that there is always the possibility of unexpected expenses.
Don't Teach Them to Make Impulse Purchases
If you have a habit of making impulse purchases while you're at the store or when you're on your phone, this is another example you may not want to set for your kids. While an occasional treat is fine, try not to overspend on things you don't need. When you feel the urge to make an impulse purchase, stop yourself, and explain to them why you're making the choice to save that money instead.
Teach Them to Budget
Children should understand the importance of budgeting. They may not deal with bills at this stage in their lives, but they certainly will in the future. Talk to them about the expenses you pay on a regular basis and help them understand why you can’t use all of your money to buy the things you want. Make sure they know that utilities and groceries, for example, are not to be taken for granted.
Don't Teach Them That Cards Mean Unlimited Money
Although cards are convenient, pay with cash sometimes so they understand that goods and services are sold for specific values.
"The problem is that many kids don’t equate cards with real money, and assume that just because you have the card you can buy anything you (or they) want without limits," explains Tiffany Rowe at Skills You Need. (1) "You know you have a problem when you tell your kids that you don’t have the money for something, and they respond ‘Yes you do! You have a card!’ Therefore, it’s important to help your kids connect plastic with real money in a bank account, not a magical money tree that gives them everything they want. Instead of using your card everywhere, use cash when possible to show how it dwindles when you spend it."
Teach Them to Live With Their Decisions
Kids might make purchases that they regret. Most people do. The solution, however, is not to give them the money to replace what they spent. They need to understand how to live with their decisions.
"This is such an easy habit to fall into, but it's a terrible lesson for your child. Watching your kid miss out on something — even if the problem is their own making — is tough for parents," says Emily Guy Birken at WiseBread. (2) "You want to give them a fun childhood. But it is so important for children to learn that financial decisions have consequences, and spending all of their allowance money as soon as they have it means there's no money for other opportunities."
Don't Make Them Figure Everything Out on Their Own
That doesn't mean you should let them try on their own to figure out how money works. The more you can teach your kids about money and financial matters, the better they'll be prepared as they grow into young adults.
1. https://www.skillsyouneed.com/rhubarb/bad-money-habits.html
2. https://www.wisebread.com/4-bad-money-habits-youre-teaching-your-kids