How to Teach Your Kids About Money and Investing
Teaching your kids about money doesn’t have to be boring or stressful. It can be simple and fun if you make it enjoyable for them to learn about money.
Learning about finances can be difficult, no matter their age. Use this guide to help your children get more comfortable saving money, managing money and investing money.
Kids learn by watching, listening and doing. If you model responsible behaviors around money, then your children will follow suit.
Your kids deserve a wealthy education from a very young age. It gives them the foundation to make good financial decisions throughout their lives.
Why Teach Your Kids about Money and Investing?
So you might ask: why teach your kids about managing money?
Isn’t it better just to teach them to manage spending? Or to teach them how to save?
Well, yes, you can teach them those things.
But you’ll also want them to be able to invest and make money work for them when they do reach the point of needing to start making their own money decisions.
Therefore, it’s important for kids to learn a variety of money lessons, so they can develop into financially responsible adults.
It’s also important to give your kids an allowance to teach them the value of work and to encourage them to learn to spend conservatively with their money.
Additionally, if your children listen to you talk about your budget and finances, they learn valuable lessons about money too.
They will learn the difference between wants and needs and about wise choices when spending their money.
While you might be tempted to give your kids an allowance that they can use to spend freely on what they want, resist the urge.
Instead, give them a fixed allowance that they can spend on whatever they want. That’s better than giving them a “drawing” out of their discretionary funds – they’ll have more control over their own money that way.
However, do choose an amount that is appropriate, based on their age, to make that amount meaningful to them.
Is It Really Important?
The importance of teaching kids about money and investing cannot be overemphasized.
When kids are young, they can easily grasp the basic concepts and be taught about money and investing. This foundation will help them create a solid financial foundation as adults.
Here are some reasons why it is important to teach your children about money and investing:
First, this helps you understand what your kids are doing with their money.
It’s easier to teach your kids about money and investing while they are still young and do not understand the differences between needs and wants.
You can teach your kids that spending their money on things they want and buying things they don’t need is counter-productive to building their financial wealth.
The habits you teach your kids when they are young will stick for the rest of their lives. So it is important to teach them good habits when it comes to spending, saving and giving.
Next, your kids need to understand the importance of saving. Saving is an important life skill.
You want your kids to understand that saving part of their money now will help them build their future wealth. The earlier they start, the better!
In addition, explaining to your kids that giving is important will help them learn the difference between needs and wants. This will make them realize the importance of giving money away to those in need.
Last but not least, your kids have to learn about the value of money. This is the foundation they need to create their wealth for the future.
Learning how to earn, save, and give money will help your kids become financially secure in the future.
How to Teach YourChildren About Personal Finance
Teaching your kids about personal finance doesn’t have to be a boring task. In fact, it can be a fun and exciting experience for both you and your children.
Here are four ways you can teach your kids about personal finance.
1. Show Them Your Spending and Savings Plans
Show your kids how you manage your money and explain it to them so that they get a clear understanding about how these processes work.
I recommend taking your family on a trip to the bank, so they can see how you deposit your money and get money out. You can also show them how you make purchases and where you buy things.
Make sure they understand how the system works and why it’s important to have a good credit score.
If you have an organized system of managing your finances, kids will learn by watching you organize and do your finances.
They are also more likely to do it themselves once you show them how it is done.
2. Let Them Help You Budget
Your money – kids can help in budgeting money.
You should explain to your children how a budget works and encourage them to help you take charge of your finances.
You could show them how to divide your budget into different income categories, spending categories and savings categories.
Give them a budget process that includes them – that way, they feel like they have a stake in how the money is being spent.
You can assign them areas that they can handle, such as:
- Decorating the bedroom;
- Spending money on special outings (movies, activities, etc.) -buying snacks for lunches and snacks for dinner;
- Buying gifts for friends and family. You can buy the items (within reason) and let them decide where they’d like them to go around the house.
It makes them feel important and like who they are plays a major role in the family’s financial success.
If you have more than one child, you can give them their own budget to handle as well, so they can learn how to manage their finances from a young age.
3. Give Them an Allowance
Give them an allowance to teach them about the value of working and encourage them to spend conservatively with their money. Kids need to learn the value of money and how to save.
However, giving your children an allowance also means teaching them the value of money. You can teach them the importance of saving, paying bills on time and even setting aside some money for the urgency.
You can give your children an allowance that is the same amount each week, so they can count on the money coming in each week. This way, your kids will learn how to plan their finances accordingly.
You could also set up an allowance jar, so they have a little fun while money they want to spend is accumulating there – this is a great way to teach savings to kids.
They can see the money add up and can eventually be spent when it’s full or saved for something specific down the road – either way, they’re learning that money has value and can be spent wisely over time if they save.
4. Encourage Them to Save Money
You can help your children save money by encouraging them to make their own savings goals.
These could be something they want to buy someday or a goal they have to achieve, such as a vacation or a camping trip with friends next summer.
Children are more likely to reach a goal they have set themselves. You could even use goal setting software to help them with this process – it can be a lot of fun!
You could also help them set goals that have to do with improving their school work or even improving their grades in school.
The goal has to be something they want to accomplish but need a little help with getting started financially.
Adulting isn’t easy!
However, there are certain things you can do to make sure your child grows up to be financially secure and understands the importance of money.
If you struggle with managing your finances or are in debt, then it’s even more important that your child sees you taking proactive steps to manage your finances and pay off debt.
Understanding the value of money is one of the most important things you can do to help your children.
You need to help them understand the concept of earning, saving and giving money, so they understand how to manage their finances as adults.
You can teach your children good habits when it comes to money, such as saving, budgeting, and planning, which will help them become responsible adults in the future.
Once your child has finished school, encourage them to get a job to earn money and start saving for their future.