7 Financial Habits To Teach Your Children

1. It Starts With You

Kids want to be just like their parents. They want to dress like them, talk like them, and work where they work. Our parents are our role models, and as we grow up, we pick up on the things they do without noticing, both good and bad.

But what if you grow up with parents who have no sense of value over money? Chances are, you won’t have it either. So before we talk about specific habits you can teach your kids, we need to start with the most important one: How do you treat your wealth when you know your kids are watching?

What good and bad financial habits would they pick up as they grow? Optimize the good ones, and slowly let go of/improve the bad ones.

2. Savings

One of the things people struggle with the most is handling savings. At all ages, the habit of saving will always be fundamental.

If your kids have an allowance, open up a savings account for them and contribute a small part of their allowance every week to this account. As the money grows, show them the bank account and how much they have saved on their own by making a small weekly sacrifice.

As time goes by, have them deduct the money themselves instead of having someone do it for them. Chances are, with time, they will start to develop a savings mentality that they will need to nurture as they grow older.

3. The Difference Between What You Need & What You Want

At a young age, you can’t expect kids to be realistic. They want to go to space and own a pony. As they grow older, they begin to understand what they need, especially when handling their own money.

An exercise you can do for this is to take them shopping for “basic necessities,” such as clothing and supplies for the new school year. Put a money limit on what you’re going to spend, and work with them to handle the limit. They’ll probably see a few things they want but don’t need. Teach them how to check off the necessities first and then spend whatever they have left on the extras.

They will start to get used to spending on fundamental things and then think about luxuries. Sometimes, they will have more money left for luxuries; sometimes, they won’t. The important thing here is differentiating between “the needs” and “the wants.”

4. Budgeting

The best way to teach your kids budgeting is through their allowance. If you do give your kids an allowance, you’re probably picking a random number weekly and sticking to it. A good practice here is to show them where that number came from. Or even better, work with them to arrive at a specific number you’re both okay with.

Sit down with them and talk through what they need to spend on. Show them the breakdown of how they should be spending their allowance. As they grow older, more expenses will likely come up for them. When that happens, sit with them again and re-adjust the budget. This exercise will teach them to adapt their money to their needs.

5. Working Towards a Goal

As we covered earlier, the wait is one of the best parts of opening up a piggy bank. Over time, you have probably learned that sometimes, good things take time. That’s why we wait for a birthday or Christmas to ask for presents. We can’t have everything we want at any given point in time.

This lesson will stick with your children, changing their mentality from “I want this now, no matter the financial consequences” to “I will wait a couple of months to make sure I can really purchase this at a beneficial time.”

6. Money Earning Opportunities

The classic lemonade stand strategy. Your parents would give you money to set up a lemonade stand and give you a shot at earning your own money. Maybe you even had parents who requested you to pay them back your expenses.

Throughout their lives, kids will find themselves making money and covering costs. Learning this from an early age is key. As a parent, the best thing you can do is support them, fund their lemonade stand, and teach them how to handle their earnings and costs. There’s nothing better than going to bed after a busy day of selling lemonade and knowing you earned your money!

7. The Value of Giving

Last but not least, this is one of the most important values to keep in mind! Instead of spending your money, you’re giving it to support and benefit something you believe in. When taught early on, the feeling of giving never gets old.

Whether they’re giving away clothes they outgrow, gifting toys they don’t use, or donating to a Christmas charity drive, teach them the value of giving. Doing so will give your kids the rewarding feeling that they are doing good and get them in the habit of maintaining the practice.