Raising Money-Smart Kids

Father and son holding white piggy bank

Teaching children the value of money starts early. It start with every allowance, money gift, and wage that they receive. The following tips can make the difference between a child who grows up to be financially secure – and one who isn’t.

Teach by example: The best way to instill good financial habits is by “walking the talk.” For instance, when you go shopping, include your kids in the process – planning, budgeting, and comparing prices and quality. If they urge you to buy something that is over budget, explain that spending more on the item you’re purchasing today is not as important as saving up for something else you need or want in the future.

Live within your means: Children who learn to prioritize their spending learn the most valuable money management lesson: to live within their means. Reinforce the message by not jumping for the credit cards or giving extra money just because your children ask. When kids want an expensive “status” item, like hundred-dollar athletic shoes, consider having them pay the portion of the price that exceeds what you think is reasonable. They’ll appreciate the item more and may think twice about paying that much when they outgrow this pair in six months. If you choose, go ahead and lend money, but treat it like a bank loan. Charge reasonable interest and set a time frame for repayment – it will teach them how loans and credit in the real world truly work.

Encourage savings: For your sake and theirs, encourage your children to make saving a fixed category in their spending plan. Discuss goals and calculate how much should be put away each month. Break down savings into long-term, for college or a car, and short-term, for a new bike or a senior trip to Europe. If you see your children about to make a mistake in spending their allowance, let them. Better to learn on a small scale now, than lose money with big mistakes later.

It’s never too early (or too late) to develop healthy financial habits. The rewards of wise money management are the same for adults and children alike – a greater appreciation of what you have, a sense of empowerment when you reach your goals, and long-term financial security.

Copyright © Balance

Another tool that can help in parlaying strong money management skills to the next generation is the Hanscom Federal Credit Union free Money Management Planner. This is a free 12-page guide that explains step-by-step how to create a spending plan. Get tips on creating a budget and worksheets to help you manage the numbers.

Download your Money Management Planner

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Hanscom Federal Credit Union
Hanscom Federal Credit Union

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