Teach kids money management skills and they will learn independence and the value of money.
In High School, I had a class called “on your own”, which was similar to a home economics class. We learned how to prepare ourselves for living on our own. Thus, the name of the class. It inspired me to successfully transition from my parent’s house to my own apartment at age 18. My kids are not offered a class like this at their school. Consequently, it is up to us to teach them how to handle their finances. Now don’t misunderstand me, I agree that parents teach their kids money management. However, what happens if you are not financially savvy? How about if you have negative feelings about money? Does your child grow up with the same negativity? I’ve given up on the return of home economic classes. Therefore, it is up to us to teach money management skills to our kids.
I have three teenagers and in the age of easy online shopping, gaming subscriptions, and what have you it feels more challenging to teach these skills. However, we do our best and they are learning lessons that I hope will stay with them throughout their lives and keep them away from financial troubles.
Below are a few tips based on what we do in our homes.
Lead by example
The best way to teach your kids about money management is to lead by example and be honest with them. Even if you are unaware of it, your kids listen to you. They listen to your conversations and observe your reactions. Pay attention to how you speak of money and how you treat it.
If you use phrases such as “money doesn’t grow on trees or “we will never afford that fancy car” you may be sending negative vibes. Furthermore, phrases such as these add resistance to your own thinking about money, limiting your chances of abundance. Instead, you might try stating it this way. “there are many opportunities to earn money” or”we really want that fancy car so we are choosing how we spend our money in order to save to buy it “. If your kids hear you speaking this way, they will pick up on it. Even better, when you succeed at reaching a goal and they see it works, it will leave an imprint in their minds that all is possible. Trust me, it happens.
Our kids are excellent goal-setters when they want to buy something. They research the price, negotiate extra chores around the house, save up their money, and reward themselves with the purchase. Of course, they were not born with this skill but honestly, we never had major conversations about it. I believe it is all learned by casually listening to the conversations my husband and I have before purchasing something.
Teach kids the value of money
When teaching your kids the value of money give them real-life opportunities. We give an allowance every month. It is not paid for their chores around the house. Their chores are their contribution to the family and are not negotiable. The allowance teaches them the value of their money.
They use the allowance for any “wants”. Obviously, we pay for their “needs”. However, if they want to purchase online games, clothing that is more expensive than what we consider reasonable, or entertainment with friends they pay with their money.
It is amazing the amount of thought that occurs before a purchase is made. All of a sudden, there is more consideration of how much this means to them. And, once they spend their money they have more respect for what they bought. They appreciate it and feel good about it. Unfortunately, sometimes their purchase is not a great choice. This is a learning experience for what to do differently the next time.
Teaching your kids the value of money helps them appreciate their money and not take it for granted. It also teaches them to wait for things. Our society is used to instant gratification. Sometimes it is good to wait.
Encourage saving as a top money management skill.
Each month when our kids are paid their allowance we transfer 15% of it into a savings account. Although they really do not need to be concerned with saving for emergencies it is a great way to show them how quickly the account bumps up. At the same time, they learn to pay themselves first and spend only what is remaining.
This method worked great for our son. When he was old enough to start working he saved 50% of each paycheck. His main account often has a very low balance. He is aware that if he does not contribute to his savings account he would spend it on frivolous things.
Due to Covid-19, his work ended. At the same time, he started driving. Because we do not pay for his gas he would not have gone very far….literally. Having money in his savings account helped him through this. He learned a real-life experience of the value of savings.
Encourage your kids to save. If they receive an allowance encourage them to put 10%-15% into a savings account. When they want to buy something, help them save for it. This not only ensures they can afford it but also gives them the satisfaction of accomplishing a goal.
Give opportunities to earn money
When kids are not at working age it is more difficult for them to earn money. In addition to their monthly allowance, we offer an opportunity to earn money by doing extra chores. As I mentioned, they do not get paid for their standard chores. These chores are in addition.
Each kid has a list of extra chores that they can do and I pay them weekly. They must commit to the chores and give me one week’s notice if they no longer wish to have the opportunity. I don’t want them doing the chores “only” when they want to earn money. Besides, if they don’t do the chores, someone (um mm…. me) needs to do them. Not only does this give them an opportunity to earn money, but it also gives them a sense of pride and a lesson in commitment.
There are plenty of opportunities for kids of all ages them to earn a little money.
One important thing to remember about allowance….don’t forget to add it to your expense list.
Help them track their money.
Some banks offer teen accounts. When my kids turned thirteen, we opened one of these accounts. This is brilliant. They have a debit card and the app on their phone allows them to check their account balances and monitor their spending habits.
They are aware that if their balance is negative, there is a $15 penalty so that keeps them on their toes.
If your child does not have a bank account, encourage them to keep track of their spending. Especially, if they often fall below.
Let them fail
We never want to see our children fail. However, what better time than when they are at home and the consequences are not harsh?
I remember the first time one of my daughters wanted to buy something and she had no money left in her account. She ran to me and asked if she could quickly do some extra chores. Reluctantly, I said no. I know, it sounds insensitive. But, she chose not to do any extra chores for the previous three weeks and I wanted her to learn to manage her money better and not wait until it was depleted to start looking for work. She learned her lesson. In fact, she is now the one that is most consistent with doing the extra chores regularly.
Letting your kids fail will strengthen their money skills. Try not bailing them out. Instead, allow them to learn from their mistakes.
Overall one of the most important skills in our lives is money management. Because I don’t see this as a class offered in our school system any longer, it is more critical to bring this awareness in our homes so that our kids are prepared. If you struggle with money management, it might be a good opportunity to brush up on your skills as well.
I came across this article that has quite a few tips for helping kids build money skills. Maybe you will find something that works for your family.
What methods do you use to help your kids with money management? I would love to get more ideas.
Some related articles about kid’s money management:
Thanks for reading!
Stay Balanced,
Jill