Teaching our children financial responsibility should be one of our top priorities as parents. Fortunately or unfortunately, financial know-how is a skill that, when honed, can give your children a massive head start, but when ignored, can set them at a disadvantage that is difficult to overcome. Tactics for raising financially responsible children obviously depend on the age of the children, but why not start young? Consider our pointers below.
- Teach the value of $1. Even little children can grasp the idea that they have a set allowable amount to spend, and that various items cost set amounts. This can be a first introduction to budgeting. Provide your children with a few dollars to spend on an item (or items) of their choosing. They will quickly see if what they want to purchase requires more money (i.e., they will need to save) or if they can afford what they want now. Empowering children can play a large role in getting their buy-in for this “game.”
- Provide options. To continue with the theme of empowerment, list out a few options for what your child can afford for, say, $5 (for example, one item costing the entire $5, or multiple lower-cost items to add up to $5). Then, let them choose. Choosing what they want provides them with a surge of independence and enjoyment. Hopefully they will want to continue challenging themselves with these financial decisions in the future.
- Encourage a young entrepreneur. There’s a reason why lemonade stands have been a popular summer activity for kids generation after generation. Whether your child wants to sell lemonade or high fives (once COVID is under control, of course), encourage them. This will train their young minds about supply and demand and work ethic, and send them home with surging pride (or a bruised ego that can be nursed back to health and learned from). Then, as early as possible, encourage employment. A summer gig is a great place to start. Nothing beats real-life experience.
- Introduce the banking system. Take your child to the bank for a field trip, and once they get a bit older, open a savings account on their behalf. Take this opportunity to explain the banking system to them and how they can use it to their advantage now and in the future. If and when your child is employed, have them open a checking account with a debit card. If and only if they’ve proven themselves as fiscally responsible adults or soon-to-be adults, then consider discussing applying for a credit card. This is a good introduction to the concept of a credit score.
- Invite compromise. The art of compromise and negotiation is one that comes in handy again and again throughout life. Allow your children to barter with you (chores for toys, for example) or to craft presentations to try and convince you of their point of view. Let them get creative.
- Educate them on the stock market. When you think about it, the concept of the stock market is actually pretty fun. Allow your children to pick a few stocks they want to purchase. The likelihood these stocks will be anything other than Disney or Apple (depending on the age of your children) is low, but with today’s technology it’s easy enough to track stock performance. The stock market offers both instant gratification and patience for long-term goals, and both can teach valuable lessons.
As we know, there are a lot of financially irresponsible people out there, and unfortunately much of this stems from not being exposed to information and opportunity as a child. Set your children up with a strong foundation, so that hopefully their relationship with money will remain positive as they grow into functioning members of society.