As parents, we understand the importance of teaching our kids lessons to help them grow into independent and healthy adults, such as: nutrition, health, safety and kindness. However, when it comes to teaching our kids about finance we don't want to stress them out, think talking about money is rude, or feel they don't need to understand finance until they are older. Yet once a child reaches 18, every step they take from college through retirement will be directly influenced by their ability to manage their finances: student loans, credit cards, jobs, mortgages, savings and starting a family.
Unfortunately, most high schools still don’t teach personal finance, so it’s up to the parents to make sure their kids have a financial education before they hit the real world. Although they may not understand all the concepts, the earlier you can start exposing kids to finance the better. This gives them a solid foundation so they will be comfortable with money and understand the more complex pieces as they get older.
Because most adults weren’t taught finance as a kid, the thought of teaching your child finance may seem overwhelming and intimidating. However, you don’t need to be a sophisticated investor to teach your kids the basics around spending, earning and smart spending.
Earning Money: A lemonade stand, or any variation, is a great way to teach kids the basics of earning money. Make sure the kids are involved from the beginning. Take them to the store so they see how much money it costs to buy ingredients. Have them decide on the cost of a cup, and then help man the station. At the end, they can count up the money and you can explain how much of that is profit. This allows them to start engaging directly with money.
Smart Spending: Take your kids shopping with you, and explain the decisions you make. Point out examples where you can compare shop and ask them to help check prices. If you have cash handy, let them pay for smaller purchases - this begins the connection that you actually need money to buy things!
Saving: Start a piggy bank system. Label three mason jars as Save, Share and Spend. Divide any money your child receives through allowance and gifts into these three jars. I recommend putting 10% in the Share jar with each deposit. Split the rest between the other two based on their goals. Help them decide what they want to buy with the Save jar proceeds, and track how much they have and how much they need. This simply gets them in the habit of always saving something when they earn money.
Keep In mind, no matter how you choose to engage your kids with finance, the most important thing is to keep it relevant, engaging and simple.
