Teaching Your Child the Value of Money

Money matters to us all, even more so when we have kids. We want our household to be financially stable, and it’s important to ensure that our kids know how to manage money for themselves, both now and in the future. Teaching your child the value of money from a young age will help them become financially stable later in life.

Most parents would agree that finances are necessary. Over 90% of parents reportedly believe that some type of financial literacy course should be a high school graduation requirement. While learning about the importance of money in school would undoubtedly help teenagers succeed, providing a knowledge base in their homes is even more essential.

Parents teaching their kids about money builds a foundation for financial independence and success in young adulthood. As a parent, you want to start the money conversation as soon as possible. Fortunately, most American parents already have those talks with their children. Studies show over half, or 56%, have already started this conversation. For parents who struggle with finances, teaching their kids how to be financially independent may seem daunting. There are many ways to instill financial values into your children, whether you’re preparing your toddlers or teens.

How To Teach Your Child About Saving Money

For some, teaching toddlers about money may seem insignificant or even futile. However, the younger your child is when they begin to understand the concept of money, the better. Here are some practical ways that you can help your preschoolers begin to understand pennies, dimes, and dollars.

Show Your Toddler What Money Looks Like

Sometimes, this simple step escapes our radar when we are busy making snacks, running bubble baths, or coloring with our littles. However, most young kids don’t see physical dollars and cents daily. Grabbing a handful of change and pulling some bills out of your wallet for the kids to hold and touch will help acquaint them with their use and value.

Get a Piggy Bank or a Clear Jar

When you use something see-through, they see the money growing. When your preschooler finds spare change around the house, show them how to put it in the slot and save it for when they are a little older so they can practice counting it with you.

Gift Them a Toy Cash Register and Explain the Cost of Things

Preschool is the developmental stage in which children engage in “fantasy play” or pretend. Help them play storekeeper or go pretend shopping. Whether in pretend play at home or out and about, the physical act of handing over money and receiving an item in return teaches them so much. Help your little one grab some change or a few dollars from their jar or piggy bank, bring their stash to the store, and give the money to the cashier. This simple action will have more impact than any verbal lesson you could teach them.

Spending and Saving With Elementary and Middle Schoolers

When kids reach school age, they begin to comprehend more of the actual value of money. For example, they can recognize the difference between something that costs one dollar and another item that costs one hundred, and they can also tell you that ten dimes make a dollar. This is the perfect time to teach them about responsible spending and the trade-offs they make when exchanging cash for items. Here are some ways to help your kids learn about finances as they grow.

Talk About the Importance of Contentment and Model It

Showing your kids how to be grateful for what you have will teach them a valuable life lesson and also help them learn the actual value of material things, wants versus needs, and how to better spend their money.

Show Your Children How To Give

This is very important if you want to raise well-rounded individuals later in life. To help you get started, having your child pick a specific charity, organization, or church they want to help personally is a good idea. This lesson will help them see how giving doesn’t just benefit the ones in need but also themselves as well. Teaching your child the meaning of charity from a young age is also an extremely valuable lesson. Volunteering is also a great way to help your kids appreciate what they have while realizing they can make a difference.

Give an Allowance and Stick to It

Some parents call it “commission” or even a “payday” because kids should receive money for doing work, not simply for being alive. Teaching your children the value of work and that time equals money will help them take that first step into managing their own finances.

Avoid Impulse Buys

Discourage your child from buying unnecessary things immediately, and model this behavior yourself. Kids are always watching and will pick up on your spending habits, for better or worse.

Show Opportunity Cost

For example, have conversations like, “If you buy that video game, you won’t have enough to buy a ticket to go to the movies with your friends later.” Teach them to prioritize their wants and decide which is worth their time and money.

Building Trust with Teenagers

While all of the money lessons before high school were laying the foundation, the real learning begins during this time frame. We cannot emphasize enough how important it is to invest (pun intended) in your teenager’s financial literacy. This will help them make wise choices in high school, hopefully leading to their independence in young adulthood. Primarily, you want to know that you can trust your child to make wise decisions when the time comes when you aren’t there to help them along the way. It’s no surprise that time will come much sooner than later. Here are some ways to help your high school learn about cash and finances before they are out in the world on their own.

Re-Emphasize Contentment

Especially as your child enters a world of comparison, it’s important to remember that contentment is the key to abundant and joyful living. Kids today constantly face the pressure to measure up and have the latest and greatest things, and social media worsens this situation. As your high schooler opens a Facebook account or joins Instagram, they will see photos and videos of other people’s “highlights” daily—not just from friends and family, but from strangers as well. This exposure can tempt them to want only name-brand clothes or feel dissatisfied if they don’t receive a brand-new car on their sixteenth birthday like celebrities. Remind your teenager that contentment begins in their heart and that comparison is the thief of joy. They may not seem like they’re listening, but they are. This lesson, in particular, will last a lifetime.

Include Them in Conversations About Household Finances

Teenagers need to watch you make sound financial decisions. Unfortunately, most hear their parents arguing about finances more than they actually see how these issues are worked out. Talk about money at the dinner table, in the car, while you shop, or wherever you can find an opportunity. Overall, make it a point to discuss the household finances as a regular part of daily living. Most adults say they wish they had learned more about managing money as a teenager. You can break that cycle and start talking with your teen.

Introduce Them to Budgeting

Help your child create a simple budget for themselves. If they have a smartphone, they can even use a mobile app. Then, help your teenager figure out how to make money. Whether offering extra chores around the house, helping them apply for a part-time job, signing them up for a babysitting course, asking the neighbors to mow lawns, or encouraging their entrepreneurial spirit, a little encouragement can go a long way.

Take Them To Open a Bank Account

This adds another layer to money management and will prepare them for managing a larger account when they get older. Don’t forget to teach them about credit and debit cards. Surprisingly, many college students don’t know the difference between credit and debit card use.

Unfortunately, credit card companies target vulnerable young adults from the second they turn eighteen. Talk to your kids about the dangers of consumer debt, what interest rates genuinely mean, and how to make wise choices. An essential aspect of this conversation should be about credit scores.

A good credit score is necessary for sound financial stability, but only 32% of parents have explained what it is to their child. Unfortunately, young adults are now suffering from it. Approximately 25% of millennials still don’t know what a credit score is, and the results of surveys show that most are still confused with these monetary topics. Start talking, and encourage your kids to ask questions before credit cards are even an option.

Use Real-Life Circumstances As Lessons for Your Children

Real-life situations are an excellent opportunity to teach teenagers how to manage money. Some examples include saving for their first car, being hired for their first job, and saving for college expenses.

Help Your Teenagers Develop Good Financial Habits

Start with the ability to save money. Show your teenagers that saving should never be an afterthought but a part of everyday financing. Some parents will even provide an incentive system to help teach their children the value of saving.

Similar to allowing your toddler to see and handle real-life money, give your teenagers some firsthand experiences. This is a great opportunity to explain and show how it can grow over time for those who participate in a 401(k) plan.

Transitioning to Financial Independence

Adult children who no longer require monetary support from their parents are considered financially independent. While it may be hard for parents to let go initially, seeing our children succeed on their own is what every parent wants in the long run. Today, college students’ most common financial issues are student loan debt, rising rent costs, and consumer debt.

Hopefully, the lessons you have taught your kids as they were growing up have laid a firm foundation for financial success, even in light of these obstacles. However, there is always time to start. While there are various ways to help your child transition to financial independence, the primary principles of this shift are talking about it often, making a plan, and setting boundaries and maintaining them. These action steps can help parents as they encourage their kids to overcome the most common barriers to financial independence.