Table of Contents
- How to Educate Your Child in Finances
- Start at a young age
- Teach them the value of generosity
- Show your child how to budget
- Keep track of how much your child “costs”
- Teach your child the habit of saving money
- Encourage your child to find a job or give them opportunities to make money
- Discuss debt
- Help your child with the student aid process
- Prepare your child for student loans
- Be an example
For many, managing finances is crucial to making ends meet and not falling behind on payments, which is only possible through good habits and budgeting skills. As a parent, you must ensure that your children have all the skills needed to live independently and be competent members of society. An essential aspect of education is teaching your children how to budget and handle finances through practice. Though talking about money can be challenging, the sooner your children have a realistic idea of how money management works, they’ll be able to plan and build a financially secure future.
You can start educating your children today by utilizing the tips mentioned below.
How to Educate Your Child in Finances
Although every parent has a unique teaching method, you should rely on some tips to ensure that your children learn the concepts and build confidence about the future. Some tips about the right approach to educating your children are:
- Encouraging questions and sharing opinions,
- Explaining relevant topics,
- Educating your children equally without biases about their gender,
- Discussing values and priorities,
- Being open to mistakes and learning as you go.
While there are many ways to educate your children about finances, we suggest implementing the ten practices below to prepare them for the future.
Start at a young age
Children should develop good habits and money management skills from a young age. Though you can’t talk about challenging money topics with your younger children, you can still educate them on basic financial skills.
Depending on their age, you can teach them the following:
- Preschoolers (3–4 years old): teach them about the concept of trading money for material goods.
- Kindergarteners (5–6 years old): gift them piggy banks or give them three jars for spending, saving, and giving.
- Elementary and middle schoolers (6–14 years old: give them pocket money they’ll have to manage, allow them to make decisions based on your budget, and encourage them to make money by helping around the house.
- Teens (15–19 years old): teach them about advanced finance managing concepts, give them the freedom to decide for themselves, discuss college costs and debts, and encourage them to find a job.
Teach them the value of generosity
Like other parents, you want your child to be empathic and generous towards others. Therefore, you should teach your child the value of generosity through raising money for a good cause. They’ll learn how to manage money and work with others, but most importantly, they’ll understand the value of giving back and appreciating what they have.
Show your child how to budget
Budgeting is beneficial for managing an income, no matter how small, which is why you must teach your child how to plan their monthly spending. They can use EveryDollar as a simple budget planner. You can also include them in the decision-making of family expenses and budget.
Keep track of how much your child “costs”
Keeping track of their expenses is a great way to ensure your children are developing good financial skills. Though it may seem overbearing or a violation of their privacy, being open with your teenage children about how much everything costs will help them have a realistic view of the world. You can also notice if they’re spending way over budget and help them become more responsible with their money.
Teach your child the habit of saving money
Nowadays, teaching your children about finances and the habit of saving money is essential for their financial security. When they’re younger, they can learn to be patient for waiting to buy things; while growing older, they can save up for college expenses, living independently, vacation, etc. You can set them up with a savings account as well. Lastly, discuss with your children the amount they want to set aside for savings, how they want to manage it, and what they’ll use it for.
Encourage your child to find a job or give them opportunities to make money
Encouraging your children to find a job is beneficial as they learn skills like teamwork, organization, flexibility, time management, etc. They can find a job in the local area or intern in a company, or they can even open their own business (e.g., selling merchandise of their art, candles, making customized jewelry, etc.).
✅ Request information on BAU's programs TODAY!
If you have pre-teen children, you can give them opportunities to earn money through classic first jobs like babysitting, setting up a lemonade stand, mowing lawns, clearing driveway snow, washing cars, etc. These examples work well when your children have a lot of time during the summer or when it won’t interfere with schoolwork.
Teaching your children how to manage finances can help them avoid debt later in life. Although discussing debt is one of the most challenging topics to discuss with your children, they must know the downsides of it. Make sure you emphasize the importance of saving money contrary to taking debt, as they’ll have to pay it back with interest.
Help your child with the student aid process
The student aid process can be overwhelming for teenagers and young adults, which is why helping your child through the process will help them reduce stress and avoid tiny mistakes. The determinant step to see if you qualify for financial aid is filling out the FAFSA (Free Application for Federal Student Aid). It’s required for applying for student loans, scholarships, and grants from schools or the government.
Prepare your child for student loans
Knowing that college costs are only increasing, it’s important to discuss all options with your child. Because college costs depend on the university, state and major, even if you have savings, you may end up exploring other means. The most common choice is taking student loans. It would be best if you gave them the complete picture of what taking student loans entail. While student loans are extremely helpful in paying for tuition and other expenses, the money they have to pay can be scary. But staying up front with payments and setting aside as much money as possible can help reduce that amount considerably.
Be an example
Perhaps the most important practice you can implement is to be an example to your children and be a more financially responsible adult. You can create savings accounts for retirement plans, college funds, or emergencies. You can also try to save money together for something they want, like a car, vacation, or a gaming console.
Teaching children about money helps them build a more secure future for themselves and be more mature with their life choices. They’ll be able to navigate through life problems more easily and confidently. It’s never too late to learn how to get your child off to a solid financial start and teach them how to be more financially responsible.