Money is probably one of the most discussed topics in any family. The pressure to provide for your children is real Start Earning.
As parents, it is our responsibility to impart good financial habits to our children.
In fact, according to a study by The Association of University Women (AUW), kids whose parents talk about money more are more likely to learn about it in school and value savings and budgeting as young adults.
We don’t want our children to grow up to be adults who struggle financially, and who spend more than they have and end up in debt.
Here are seven money lessons you should teach your kids before they earn their own money.
Table of Contents
1. Save Early
The sooner you start saving, the more money you will have later on in life. Teach your kids that saving is important and should be a priority, even at a young age.
Establish a piggy bank or encourage your child to deposit loose change in a jar every time they buy something from a vending machine at school or from the cafeteria at work.
Not only will this teach them the value of saving money at an early age, but it could also help them develop better spending habits as well.
When your child gets older, open an investment account in their name to help them save for big-ticket items.
2. Earn Money by Working or Contributing
Children as young as 7 can start contributing some of their money to their piggy banks.
As they get older, teach them to earn their own money by working or contributing some of their own time to chores around the house.
By contributing to household chores, they will become responsible adults in the future who know how to take care of themselves and their families.
You can encourage them to work for their allowance. They’ll appreciate the fact that you are not just giving them money for doing nothing.
This also gives them a sense of pride and responsibility, which is important to instill in them from a young age.
3. Invest Wisely
Teach your children how to wisely invest their money.
This includes the importance of balancing risk and return, as well as the benefits of compounding interest over time when investing.
Educate them about stock investing, bonds and mutual funds by letting them be involved in your investment decisions.
Let them do some research about investments online and even watch the stock market on TV with you.
This will not only give them a better understanding of how to invest, but could also help them gain a better perspective on how the world works too.
You can also let your child pick his own stocks to purchase for your investment portfolio, giving him a taste of what it’s like to buy and sell stocks as a trader.
Investing is an important habit to instill in your children so that they can reap the benefits later in life.
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4. Pay Yourself First
Teach your children the importance of paying themselves first.
This means setting aside a certain amount from their paycheck each month before spending anything else, including rent, food and entertainment.
That way they can set aside money for emergencies and for retirement down the road. Without a solid savings plan, it will be hard for them to achieve their dreams in the future.
“Paying yourself first” will help your children have a rich mindset and become financially independent in the long run.
After all, it is much more enjoyable to save up for the future than to be broke all the time because you spend everything you earn on instant gratification now.
5. Pay Your Bills on Time
Teach your children the importance of paying their bills on time to avoid late fees.
While it may seem obvious to adults, most children these days don’t seem to understand the consequences that late payments could have on their credit score and credit rating later on in life.
Show them how late payments can affect their ability to get loans in the future for things like cars and houses, which will make it harder for them to get ahead in life.
Encourage them to always pay their bills on time to avoid unnecessary fees and improve their credit standing in the future.
6. Avoid Debt
Teach your children to avoid debt at all costs. Instead of purchasing expensive items with a credit card, encourage them to save up money for those purchases instead.
This way, they won’t have to worry about interest rates and other penalties associated with credit cards or other forms of debt later on in life.
It is much better to save up for something instead of buying something with borrowed money when you don’t have the money to pay for it in the first place.
Make sure you’ll instill this in your kids at a young age, so they will grow up to be responsible with money and avoid unnecessary debt problems in the future.
7. Plan for Retirement
Teach your children the importance of planning for retirement.
Explain to them that, no matter how old they are, they should always plan for retirement by putting their money in a retirement account.
Don’t just tell them to save money for their future; show them how to do it the right way by contributing to a retirement fund as early as they can.
Show them how they can save a certain amount every month, so they can retire comfortably one day in the future.
Show them how they can maximize the power of compound interest as well to help increase their retirement fund over time.
They’ll be thankful when they’re older that you took the time to teach them about financial planning early on in their lives.
Bonus Tip
When teaching your kids about money, make sure to include fun ways to supplement the lessons you’ve taught them about saving, budgeting and investing.
One way is to let them set up a lemonade stand or bake sale, so they can learn how to earn money on their own.
This way they’ll be more motivated to follow your advice and won’t resent you for trying to give them life lessons about money.
You can also play games with them, where you’ll explain to them the value of money and teach them how to use it wisely.
There are a variety of board games available where you can use to teach your kids valuable lessons about money, like Monopoly, The Game of Life, and Cashflow for Kids, to name a few.
Once they have a better understanding of the financial concepts you’ve taught them, you can let them loose on some games so that they can apply what they learned in a fun environment.
Summary
Your kids will grow up to become responsible adults with rich mindsets if you take the time to teach them how to properly manage their money from an early age.
Start by teaching them how to achieve short-term goals, such as saving up for a new toy or gadget that they want.
Once they’re old enough, you can move on to teaching your kids about long-term financial goals, such as investing for their retirement and paying off their student loans before they graduate college.
Teaching children this early on will help them set a solid foundation for their future financial stability.
Now you can give them all the tools they’ll need to succeed, and they’ll be better off for it in the long run.