Managing your money and your personal finances is hardly a game. But here are some fun ways you can teach your kids about money management.
Teaching kids early about money management is the best way for them to learn how to grow to be financially savvy adults. It can also help them to avoid some of the personal finance mistakes you have made. Of course, there are many ways to teach kids about money. But the experts all agree to keep it fun and keep it simple.
One of the easiest ways to teach your kids about money is to not keep it as some kind of deep, dark, scary secret.
Be willing to talk to kids openly about money and financial matters. Mitchell Kraus, founder of Capital Intelligence Associates in Santa Monica, California, echoes what many experts say: “The best way parents can teach their children good financial habits is by discussing the money decisions that they make.”
Kraus acknowledges that everyone makes different financial decisions. However, you should at least discuss your thinking on spending and saving with your kids.
For preschoolers, she suggests that “When they get a treat at the bakery or a toy at the toy store, let them hand the cash or credit card to the cashier. That helps them to understand that money is transactional, which is a core concept that you can build on as they get older.”
For elementary-age kids, financial planners like Kraus say that Games are a fun way to impart financial lessons. “As funny as it sounds, Monopoly is a great game to play with children to begin the concepts of money,” says Aaron Leak, founder of ECL Private Wealth Management in Rockford, Illinois. He says older elementary school kids can handle more complicated financial transactions, as long as you’re leading the way, of course, and monitoring their finances.
Other ways that the experts suggest to help kids grow into financially sound adults include:
Give Them an Allowance
Giving kids an allowance in exchange for doing household chores is a great way to teach them about earning and making good choices with their own money.
Give Them Other Opportunities to Earn
Beyond an allowance, as soon as kids are old enough and responsible enough to do so, you should give them the opportunity to earn some money outside of the household. Some ways that the experts suggest include:
- Yard work for a neighbor
- House and/or pet sit for vacationing neighbors
- Sell crafts on a website, such as Etsy.
- Organize a yard or garage sale
- Shovel driveways for neighbors in the winter
- Wash neighbors’ cars
- Collect recyclables
Get Them Involved in Giving
“Engaging your children in thoughtful philanthropy is a hands-on way to share your family’s values and teach your children about saving and giving back to their community,” says Ross Cohen, a certified financial planner and wealth advisor at Bartlett Wealth Management, a firm with offices in Cincinnati and Chicago. This can be anything from fundraising for your house of worship, or you and children can get together and raise money for a worthy cause such as the Humane Society or Save the Children, or any other organization that reflects your family values.
Once kids get into their teen years, you may want to consider getting them a debit card.
Not a credit card, credit cards at an early age are the worst things for young adults. However, a debit card can help them learn about budgeting and money management. “I do not recommend credit cards for anyone under 25. The frontal lobe, which allows people to connect current actions with long-term consequences, does not fully develop until the mid-20s,” says Craig Everett, a professor of finance at Pepperdine Graziadio Business School. “Credit cards allow current spending that may have significant negative future impacts, so incomplete brain development can have disastrous financial consequences for these people who are just starting their adult life.”
He recommends that parents encourage their adult children to use debit cards exclusively until age 25. Everett admits that your adult kids are unlikely to follow your advice, but “it can’t hurt to try,” he says.
All the experts agree that by teaching your kids about money management skills and how to grow to be financially responsible adults, you are really helping yourself because you will hopefully be preparing them for an adulthood where you will not be responsible for their financial mistakes.
And who knows, if you do a really good job, they may someday make enough to support you in your old age!