How to teach your children about money
Your child is never too young (or too old) to learn how to handle money, including saving, planning, and spending. Here are some tips to teach your children about saving money:
1. Discuss Wants vs. Needs
The first step in teaching kids the value of saving is to help them distinguish between wants and needs. Explain that needs include the basics, such as food, shelter, and clothing, and wants are all the extras.
2. Let Them Earn Their Own Money
If you want your children to become savers, giving them their own money provides them with the opportunity to learn how to use it. When you offer allowances in exchange for chores, they’re also learning the value of their hard work.
3. Talk about money
If you want kids to learn about saving, it must be an ongoing discussion. Whether you schedule a regular weekly check-in to talk about money or make money chats part of your daily round, the key is to keep the conversation going.
4. Leave Room for Mistakes
Part of putting kids in control of their own money is letting them learn from their errors. It’s tempting to step in and steer kids away from a potentially costly mistake, but it may be better to use that mistake as a teachable moment. That way they’ll know in the future what not to do with their cash.
5. Set a Good Example
If you want your children to become smart with their money, being one yourself can help. Getting your emergency fund in shape, opening a 529 savings account or simply increasing your 401(k) plan contributions are all steps you can take to encourage saving as a family activity. You could also decide to save for something together, such as a family vacation or a pool.