Money management for kids can be a tough subject for parents to teach. These 7 tips include 5 things to avoid and 2 things you must do now.
Avoid These When Teaching Money Management for Kids
- 🛒 Avoid impulse buying. Set the example and demonstrate to your kids that you have self-discipline and can easily differentiate between needs and wants.
- 🚧 Avoid debt. Debt is easy to get into and difficult to exit. One purchase made without a plan and thinking through the consequences can result in years of money stress. An example is buying a new SUV with a massive payment on a 6-year loan.
- 💳 Avoid always swiping the card. When kids are young, they need to understand that your money is finite. If you load a basket of goods on the conveyor, swipe your credit card, and go home with a trunkload of stuff – then kids do not make the connection that you have just spent part of what you have available for the month. Use cash at least occasionally so they can understand the relationship between the card and your bank account [see related post, “Avoid This Financial Mistake When Teaching Kids About Spending Money“].
- 👷♀️👷♂️ Avoid giving kids an allowance. Kids should do 3 kinds of chores. The first is basic chores that are required of each family member as part of the household. Then second is chores that they can do to earn some money for small purchases such as snacks or entertainment. The third is larger chores to earn extra money to save for a larger purchase. Kids need to learn that money comes from work. If you just give them an allowance for being your kid, then they find it hard to make the connection.
- 😠😓 Avoid having a bad attitude about money. If you have a bad attitude about money and show how it stresses you, then your kids will inherit that attitude. If you teach them good money habits such as budgeting, avoiding debt, and making thoughtful purchases, then they will have a good attitude about money and will be less likely to grow up expecting that money is a source of stress.
Do These
- 🧮 Use a budget. All good personal finance decisions start with a budget. If you don’t have a budget, then you’ll most likely spend more than you make and rely on credit to make up the difference. Kids can start with a basic budget of three envelopes labeled save, spend, and give.
- 💰 Teach kids to invest early. After kids master a simple budget using saving, spending and giving envelopes – it’s time for them to start investing. Since your kids will probably rely on 401ks and IRAs instead of pensions, they need to understand the basics of stocks and mutual funds. If you get them off to a good start, then the power of compound interest and the habit of regular investing can put them on the path to becoming millionaires in their early 50s! [see related post, “Have Kids Invest Early, It’s More Important Than Ever“]
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Really enjoyed reading these tips especially 1 and 3 on what to avoid!
Thanks, Sylvia. #3 is more important than most people realize 😳.
such a wonderful post with lots of valuable tips.
really love the way you explained what not to do when teaching financial literacy to our kids.
thanks for sharing.
Thanks Hari. It’s my passion to help other parents avoid some of the things we had to figure out the hard way. 😁
Fantastic! Great tips, thank-you!
Thanks, Lyndell. Comments like yours keep me writing. 🖋
Hi John, Not giving Kids allowances and teaching them budgeting are great tips.
Thanks, Tina. Kids who learn that you have to work for money and that you must plan your spending, saving, and giving will be better money managers as adults.
These are great tips! We have young kids right now, so it’s good to start figuring out a strong foundation for finances. We definitely want our kids to know the value of a dollar!
Thanks, Melissa. I’m glad to hear that you’re taking steps to raise kids who are financially literate. It’s an important part of parenting that is often overlooked.
These are great tips. My parents did not talk about money at all and I was TERRIBLE with my finances. I got into some pretty good debt in college. I am determined not to let that happen to my kids!
Thanks, Carrie. It is so important for parents to teach kids financial literacy. I too was motivated to help them avoid some of the mistakes that I made with money when I was younger.
I learned budgeting from my job coach. My parents forgot to teach me that
Thanks, Jimmy. I’m glad you have a good coach. That’s a great call out. If you need help, find a good financial coach who can walk you through the concepts and help you adjust your plan.
Thanks for the list! It’s very helpful to have things to avoid! Great idea! Thanks!
Thanks, Katherine. Sometimes things to avoid are just as important as things to do. 😁
Great job separating the article into the do’s and don’ts when teaching children about money management. You’ve shared some really good advice!
Thanks, Miranda. If we teach kids good money management skills, then they can avoid joining the 78% of people in the US who live paycheck to paycheck.