Parents are more comfortable talking with their kids about bullying and drugs than they are about money, according to a survey conducted by T. Rowe Price. The study also found that 77 percent of parents are not always honest with their kids about finances, and 15 percent lie to them about money weekly. We don’t want our children to stress over mounting bills, but we don’t want them to grow up financially illiterate, either. Start teaching your kids about money today with these techniques:
Discuss Money Regularly
Kids don’t need to be sheltered from the realities of earning and spending money. The sooner they understand money concepts, the sooner they can take responsibility over their own allowance spending and saving.
Incorporate money talks into your day-to-day routine. Point out which groceries (think milk and bread) are necessities and which are luxuries (like chips and soda). Talk about how the more you earn, the more you can splurge on extras. Further engage them by asking for help researching the best deal on cable services after a move or by discussing what factors you should take into consideration when purchasing a new family vehicle.
An article on Money.USNews.com points out some of the possible outcomes of heavily involving children in the family finances. Several experts in the article suggest giving children bite-size pieces of information about the financial status of the family without painting a full picture. When a child wants to know how much a parent makes, another way to frame it is to explain the greater importance of the ratio of monthly bills to income.
Though factors like the child’s age and the family’s current financial situation may guide discussions, parents have to decide for themselves how much financial disclosure is best for their children.
Make Earning and Saving Money Fun
Show your kids that financial responsibility is a rewarding journey, and you just may foster mini-entrepreneurs. Let children in your household set up earning goals, and offer payment for taking on extra chores. Also encourage them to come up with ideas on making extra money. Once a week, declare how much extra everyone earned. Reward the kids for the most money made and most creative earning idea.
Help your children decide how to save their own money, whether that’s in a regular savings account, money market account or CD. Explain how each option differs. Show them how interest turns into free cash down the road. Let them see how the money grows annually and how to plan ahead for their financial future.
Set up a Budget
For pre-teens and teens, help them set up a budget on an app like Mint.com. They can track how much they spend on their food, entertainment, fuel and more. Review it weekly to help them set reasonable savings goals for things like a car, a new gaming console or college.
Discuss ways you can stick to the budget, like watching free movies online or checking them out from the library. Don’t forget to discuss what to do if you go over budget. Should you sell off future structured settlement payments through a site like JGWentworthCashNow.comand use the lump sum to help pay off debt? Dip into next month’s budget? Or come up with a way to earn extra money like tutoring, yard work or errand-running? Figure it out together, going over the pros and cons of each.
Remember to come up with fun, budget-friendly activities, like cooking together as a family once or twice a week, baking your own bread or scouring thrift stores for great finds. Turn budgeting into an adventure instead of a chore.