Disclosure: This is a collaborative post
Handling money is one of the most frustrating things in life. If you don’t learn how to do so from a young age, it’s going to be very hard to navigate life from the moment you need to stand on your own two feet.
It’s an important skill to learn that really will guide the choices you make and your reactions to unexpected situations in life. After all, financial health doesn’t mean you’re always in the green, but it does mean you avoid behaviours that are likely to tank your bank account even further.
When you’re a parent, demonstrating a good example for your kids is the best way to teach them what money is, the value it holds, and how to be responsible with it. You’re not always going to be around to give them advice, so making sure they see the best of financial management from the moment they’re old enough to understand it is crucial.
That’s why the habits below are great for sharing with your kids. Make your actions visible and be willing to have in depth conversations about them – your kids will soon pick up on the financial tips you’re laying down.
Table of Contents
Don’t Be Perfect
Everyone makes mistakes with money. It’s easy to spend a bit too much or to invest in something you shouldn’t have. That’s why you should tell your kids that the goal isn’t to be perfect with their money. It’s just to be as responsible as they can by making the best decisions at the time.
No one should need to be perfect with their cash either. Financial wellness means something different for everyone, and it’s OK for your kids to come up with different definitions to you. As long as you see the thinking behind their choices, and you know they’ve put effort into making the decision, it’s something to be proud of.
However, you should also let them experience the consequences of their decisions around money. If they get an allowance and end up spending it all in one weekend, even though they want to go out with a friend next week, remind them of the choices they decided were best for them. It might not seem fair, but practical examples are the best kind for kids of all ages.
Tell Them About Your Savings Goal – Good Money Habits
If you’ve got a savings goal, share it with them. Maybe you would like to take the family on holiday? Maybe you and your partner are saving up for a bumper date night? Or maybe you’d like to buy a new kitchen without totally ruining the budget? If you’ve got a goal, don’t keep it a secret from the kids.
You don’t have to share all the details, but just letting them know you’re trying to save can encourage them to do the same thing. If it’s a common behaviour their parents employ, they’re going to join in – all kids do!
Talk about how much you put away, what that means for you, and how excited you are to reach your goal so you can afford the thing you really want. When the habit is presented positively, the kids are going to be ten times more interested than if they just heard complaints about how hard it is to save some money. Whilst we completely understand that it is, make sure the kids know that it’s worth it!
Take Out Credit Only When Essential
It’s easy to apply for a credit card and get approved. It’s easy to use that credit card whenever you want to delay a payment for a bit longer. However, it’s essential to only take out credit when you really need it. Not only does it improve your credit score, but it removes a source of temptation from life which anyone can fall into – even the most responsible among us!
To make this clear to your kids, parallel the need for credit with an example relevant to their life right now, like their grades at school or the amount of gold stars they have on a chore chart.
You should also tell them that a credit score isn’t a permanent mark. Much like a grade they can get at school, it can go up and down. It doesn’t make someone a bad person if they struggle to keep the score ‘high’, and if you want to buy an essential and can’t quite afford it, you can apply for things like bad credit car finance and be approved. When you need something, saving is only one of the methods you can employ to keep your account in the green.
Of course, the concept of credit can be a hard thing for little kids to understand, so aim for 10 and over with a lesson like this.
Set a Pocket Money Rule – Good Money Habits
Do you want the kids to get pocket money each week no matter what? That’s OK, and it’s a good way to make sure your kids always have a cash baseline that’ll encourage independence. However, if they want to earn more, there should be a rule about what’s worth a bit more pocket money.
They probably already have assigned house work tasks around the house – these probably shouldn’t have a value as technically they already earn pocket money for this – but there should be a set of things they can do voluntarily if they want to earn a few more pennies.
For example, if their usual job is to load the dishwasher after dinner, they don’t earn any extra. If they volunteer to also dust a few rooms on the weekend (a job you usually do), they can earn a little more.
Let Them Read Through Receipts – Good Money Habits
Want your kids to see examples of money spent in real time? Let them read through the receipts you bring back from the supermarket. Walk through them together and talk about the cost of items you have to use, wear, and eat every single day.
This is a good way to show them the value of money and how it can be used in daily life without getting too wordy or overwhelming. This also will teach them a little about running a household and why a budget is essential for doing so.
Create a Spending Diary with Them
A spending diary is good for adults and kids alike. It means you’re able to track what’s going out of your account on a day by day basis, with a total at the end of the page that’s easy to read and understand.
If your kids get pocket money and have been spending it, sit down with your child and help them make their own diary. Buy them a little notebook to use specially, and give them stickers and glitter to dress it up with. If it makes them more likely to use it whenever they spend money, let them cover it in whatever they want!
You can then teach them how to draw up a table, what numbers to put in, and why it’s important to not spend more than they really have.
Show Them the Power of Donations
Donating to charity and other causes is another way to smartly use your money. Not only does it spread goodwill to the things you care about, but it can even make sure you don’t spend your spare cash on unnecessary things.
Supporting a cause is a great thing in life; it makes sure you’re giving back to the world and society you’re a part of. For kids, this is likely to be something to do with animals, such as a zoo you took them to recently. As long as it’s their choice and they understand it, it’s good.
Talk About What You Want vs What You Need -Good Money Habits
It’s very easy for kids to see something new, shiny, and fun and want to buy it. It’s also easy for them to forget all about their new toy within a week and for it to just take up space in their toybox.
To prevent this, make sure you let the kids know the difference between what you want and what you need. Sure, what you want and what you need can cross over with each other, but that won’t always be the case.
Long story short: if you need to buy something later, and won’t have money to do so because you want to spend on something right now, you should take a step back and think again. That’s what the kids should understand, especially when you’re forced to go through the toy aisle whenever you go to the supermarket!
Good money habits require a demonstration. Make sure your kids see you abide by rules like these from a young age. Kids pick things up from their parents pretty quickly, so be an obvious model. The more you make it clear that financial responsibility is the best way to live, the quicker the kids are going to start saving their pocket money!