Teaching your children financial literacy early on influences how successful they are in adulthood.
Saving, investing, budgeting, and spending wisely, can teach your children good money management that helps them build wealth in the future. Learning finances can also help them build character, growing their discipline, confidence, creativity, and solution-based thinking.
To instill good financial habits in your children, implement these six tips:
Share Why Good Financial Habits are Important
First, it’s essential to share why good financial habits are necessary with your children. If you can explain what good money management can do for them in a way they can resonate with, they’ll be more likely to absorb the information genuinely.
It’s best to first familiarize yourself with financial information most relevant to your children. For example, if you have teenagers, look at trends regarding financial habits for members of Generation Z.
You’ll learn how Gen Zers lack traditional savings habits and are more likely to be anxious about their finances because of the uncertainty they’re living through. You can then discuss what you learn with your teen and how it affects them.
Also, when sharing why good financial habits are essential, introduce your children to financial resources that can help them comprehend the information even more.
Introduce Your Children to Financial Resources
It’s an excellent idea to compile a list of kid-friendly financial resources for your children. Don’t feel like you have to be the one to teach them everything about good financial habits. Instead, lean into experts and influencers.
Whether it’s YouTube channels on investing, social media accounts, games, or personal finance books, introduce them to your children to grow their financial literacy. Be sure to try anything you want to show them yourself first to ensure it’s teaching what you want it to teach and age-appropriate.
Mock investing can instill good financial habits in your children too.
Perform Mock Investing
It’s essential to teach your children how to invest in their ongoing education in finances. Investing is an integral part of building wealth. But it can be difficult for adults to learn, let alone children.
Thankfully, some resources make investing concepts, tips, and techniques digestible for children. For example, you can find virtual stock market games online that use current market data. These games can teach your children about investing and trading without risking real money.
Research games and platforms for mock investing that your children might like. Play the games with them to get them started. Then, give them space to experiment with these games and platforms at their own pace.
Turn Store Trips into Money Lessons
Turning store trips into money lessons is another way to teach your kids about finances. They’ll likely be more inclined to take money more seriously when they see how it works in real life.
When your children are with you at the store, point out how much things cost. Share your budget for the day and show them how you choose products to stay within that budget.
You could even give them a few dollars and allow them to choose how they spend it. Then, when they can’t afford something, you can then start a conversation about saving money or doing more chores to earn more.
You can take your money lessons to the next level with actual bank accounts for your children.
Help your Children Open Bank Accounts
Opening bank accounts for your children is one of the best things you can do to further their financial habits. Not only will they develop a relationship with their financial institution, but they’ll also have tools at their disposal to learn to manage their money on the go.
You’ll have to set up custodial accounts for each child under 18. You’ll have to sign off on any withdrawals and deposits, but let your child lead every interaction with the banker. And when they turn 18, help them open their own account and give them more control over their finances.
Teach Them How to Budget
Aside from banking, budgeting is just as critical to financial success. If your children become accustomed to spending money whenever and however, they’ll continue that bad habit in adulthood. As a result, they’ll accumulate loads of debt and won’t ever be able to live comfortably.
Teaching your children how to budget will also help them prioritize saving. Educating them on how to best put away money for college, emergencies, big purchases, leisure activities, and so forth will help them learn the importance of being proactive with money.
The earlier you teach your children the importance of living below their means and allocating money responsibly, the better. So, sit down with your kids and show them how you budget the household income.
Have them create their own savings goals and incentivize them to help your kids stick with them. You could even take things a step further and let your teenagers lead a budgeting session each month to get them in the habit of budgeting.
Instilling good financial habits in your children starts with your example. Be sure you’re managing your money well so that your children can follow in your footsteps. And continue to guide them in the right direction on their financial journeys with the tips above.
Dan Matthews is a freelance writer with a penchant for financial wisdom and solid research. You can find him on Twitter @danielmatthews0 and LinkedIn.
Josh founded Money Buffalo in 2015 to help people get out of debt and make smart financial decisions. He is currently a full-time personal finance writer with work featured in Forbes Advisor, Fox Business, and Credible.