Talking about money often falls into the category of taboo. But talking about financial matters with your kids is different than talking about money at a cocktail party.
As a parent, you set the stage for how your kids will view and handle money in the future. Talking about money on a regular basis sets a foundation for your kids to build a strong financial knowledge-base. In fact, a recent survey by T. Rowe Price found that parents who discuss financial topics with their kids at least once a week are significantly more likely to have kids who say they are smart about money (64% vs. 41%).
These three tips to raise money-savvy kids will help you start and keep the conversation going by engaging with your children on money topics in a variety of ways.
Turn Money Lessons Into Games
Children, especially younger kids, learn through play. From make-believe shopping trips to board games, you can engage your child in money conversations through fun activities. Playing pretend is a normal, and healthy, part of growing up. When playing pretend with your kiddo, foster good money habits by building spending, saving and giving into your childs pretend scenarios. For example, if you are pretend-shopping at your childs imaginary store, give them some fake (or real) money and have them pay for the items in their cart. Tell them how much each item costs and reinforce counting skills as you play.
Board games can also be a great learning tool for kids as they age. Classic examples of board games that teach kids about money include Monopoly, The Game of Life and Payday. Moneywise Kids also teaches kids about money in a fun, approachable way.
Teach Your Children How to Earn and Manage an Allowance
Parents often debate whether to give their children an allowance. One of the key pluses for those with a pro-allowance stance … teaching kids how they get money and, just as importantly, how to budget their funds. Use your childs allowance to instill money values. When youre just starting out, consider setting up multiple piggy banks, each with a different purpose. Some use the save, spend, give method. With each allowance paycheck teach your child how to put a percentage into saving, a percentage aside to help others, and what they have left is available to spend. Take the lesson further by helping them select an item at the store to buy with their spending money. If they select an item that costs more than what they have to spend, discuss wants versus needs or working additional chores to earn money for that special item. This is a great way to teach the concept of delayed gratification. As your kids get older, allow them to manage their allowance on their own. Statistics show kids that manage their own money have better financial habits.
Team up With Your Kids on Purchase Decisions
Include your children in conversations about big (and small) purchases. These conversations allow you to dive into many financial lessons, including the difference between paying with cash or credit. If youre buying a car or home and taking out a loan, share what this means in terms of monthly payments, and how that impacts the familys budget. Tailor your conversation to your childs age. Kids learn different concepts at different ages and its important to keep these developmental milestones in mind when bringing your children into the decision making process.
To set your kids on the path to financial success and help them be money-savvy adults, dont sweep money conversations under the rug or hold them behind closed doors. The key to raising a money-savvy kiddo is simple – talk to them, teach them and let them make money decisions on a small level, so when they need to manage larger sums, they have strong financial lessons to draw from.