8 Ways to Teach Your Kids Responsible Money Management
Every parent wants to raise their children to be financially responsible adults. By teaching children about money management and budgeting at a young age, they’ll be more equipped to make better financial decisions as they grow up and navigate through life. Here are eight tips for raising kids to grow into financially responsible adults.
Lead by example
Modeling a behavior is always the best way to teach it to your children. Let your kids see you making responsible money choices whenever possible. Share your decision to skip an impulse buy, talk about the money you put into savings each month and let them know you’ve chosen a less expensive phone even though it’s not the latest one on the market.
Explain how money works
For very young children, you’ll need to start at the beginning. Teach your preschoolers about the concept of money as soon as they’re old enough to show understanding. Explain what money is, how it’s earned, and how a paper check, credit card and checking account work. You can talk about some of the expenses you have and teach your child what inflation is in a way they can understand. One of the best opportunities to teach how money works is at an arcade. Help them understand that purchasing tokens or credits onto cards for the games is just exchanging one type of money for another, and that when it’s empty, the money has run out.
Teach them budgeting basics
Successful budgeting is the foundation of financial independence. Teach your kids about the concept of earning money and being mindful of how it’s spent while they’re still young. Then, build upon that knowledge as they grow. Small children can understand budgets in only very basic terms, but as preteens, they can watch you work on an actual budget. Once your kids hit their teens, let them help you create budgets for large expenses, like a family vacation or home improvement project. You can also help your kids pick up this invaluable money management tool by encouraging them to budget their own allowance and any money they earn. Talk about their total “income” as well as their “expenses”. Show them how to divide their money properly so they have enough to cover all their needs and wants.
Give them purchasing power
One of the best ways to teach your preteen or teenager how to manage their money responsibly is by giving them more financial freedom. The next time your child needs to buy an expensive item, like a coat or a pair of sneakers, have them make the purchase on their own. Give them a reasonable amount of money and some guidelines, and then let them do the rest. They may make some mistakes, but they’ll learn invaluable lessons from the experience.
Board games can be a powerful tool for teaching basic money concepts to kids. Spend a fun afternoon playing a family game of Monopoly, The Game of Life or Cashflow 101 and your kids will be picking up valuable financial lessons with every roll of the dice.
Utilize online resources
In 2023, there are dozens of online resources available to help teach kids about money.
- Online courses: Platforms like Coursera and Udemy offer courses on personal finance and money management, including courses specifically designed for kids.
- Online games: Websites like BizKids and The Mint offer educational games that teach kids about money and financial concepts.
- Virtual financial simulations: Virtual simulations like Stock Market Game let kids practice financial decision-making in a safe and controlled environment.
- Websites: Websites like Family Education and Sesame Street Games provide resources for teaching kids about money, including interactive games and activities.
- Apps: Apps like RoosterMoney are designed to help kids learn about money management, including setting savings goals, tracking spending and making responsible financial decisions.
These online resources can be a great way to supplement traditional financial education while making it fun and engaging for kids.
Help your kids build up their saving muscles by getting lots of practice now. Have them choose something expensive they’d like to save up for, and talk to them about saving for the purchase. Assist them in determining how much money they can realistically put away each month, and together, build a timeline to their goal. You can even talk to your kids about long-term savings, such as saving up for their first car, or even a down payment on a house. It’s never too early to start thinking about large purchases. To bring it up a level, use this talk as a springboard for an intro to investing. Explain how compound interest works, and use a calculator to show them how much a specific amount of invested money can be worth 10 years down the line, in 20 years, or even 30 years from now.
Open a youth account
Another fantastic way to teach your kids how to manage their money is by opening up a youth account in their name. Our Lil’ Partners Account is designed for kids 12 and younger. We have quarterly coloring contests with cash prizes, your child gets a free toy with every deposit and more. When you open a Teen Partners Account, your teen can have their own savings account and a checking account with a debit card. You can review their spending at any time, too. It’s the perfect way to teach them financial responsibility on their own terms.
We all want to raise financially responsible kids, but that is easier said than done. Use these tips to teach your kids about responsible money management.