Preparing your children for financial success is an important part of parenting. After all, you don’t want to be stuck paying their rent for their entire adulthood because they never learned what it means to be financially independent. Luckily, teaching your kids about money is actually pretty easy. It mostly involves consistency to make sure they understand the financial ins and outs of the world.
Here’s a step by step guide to setting your children up for financial success:
Step 1: Start Early
It’s never too early to start teaching your kids about money. This doesn’t mean you should start rattling off investment choices the day they are born, but there are little things you can do to help your child start learning about money from a very young age. Even before your child goes off to kindergarten, they should already have a few easy money lessons under their belt.
For example, they can learn about saving, spending, and giving and how to divide their money into those three categories. They can also learn about the relationship between work and getting paid by doing extra work around the house. By continually emphasizing the importance of understanding money and how it works, these conversations will become a part of their daily lives and by extension, a part of their actions.
Step 2: Set a Good Example
There’s no point in teaching your children about money if you aren’t going to walk the walk yourself. For example, you should be saving, spending, giving and investing on a regular basis. You can also set a good example by explaining your money decisions to your children. It can be small, like when you go to the grocery store you talk about wants and needs and also allow older children to count out the money to give to the cashier.
It’s also a good idea to be generally positive about money, and try not to burden them if you are in financial trouble by saying things like, “We’re too broke to buy ice cream.” Instead say, “Ice cream is not on the list. We have to stick to the list in order to make our budget, which is important for our future.” Then, that opens the conversation for more money discussions.
Step 3: Let Them Make Choices
Once your children get a little older, you can let them make more money choices. Giving them a budget to plan their birthday party or to buy some school supplies is a good way to start teaching them about the value of money. It’s better to let them make money mistakes now when they’re younger than when they are older and not under your roof.
So give them a little leeway and allow them to budget for a few things. Then one day they can budget for even larger events and expenses like a study abroad trip or even their own wedding.
The Bottom Line
As your children grow up, you’ll need to take every opportunity you can to teach them about financial independence. A five-year-old can understand saving, spending, and giving, but a 15-year-old can start to understand even more about investing, how much college costs, the value of working, how to plan to buy a car and a house, and how to avoid debt. These topics won’t be difficult to digest and they won’t come as a surprise if you’ve been emphasizing financial wellness from the time they were young. Once your child understands the basics, start to teach them about more difficult topics like investing and always allow them space to make their own choices and budget to really solidify the message.