9 ways to teach kids about money

Introduce valuable money-management lessons and spending habits early on.

  • By Geoff Williams,
  • U.S. News & World Report
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Imparting important financial lessons, including saving strategies and money-management skills, is crucial to help your children achieve long-term success. From relaying the value of a dollar to cultivating smart spending and saving habits from a young age, teaching the right lessons can shape your kids' future attitudes toward money. If you're looking to share critical money concepts and set your kids up for financial success later in life, use these expert-backed strategies and tips.

Here are nine ways to teach your kids about money:

  • Demonstrate the value of money.
  • Talk to your kids about money.
  • Stress the importance of curbing impulse purchases.
  • Discuss big purchases with your kids.
  • Encourage teens to get jobs and earn money.
  • Help your children open a bank account.
  • Show your kids how to map out a budget.
  • Teach kids to use credit cards the right way.
  • Introduce your kids to basic investing concepts.

Demonstrate the value of money

Because visuals can be a helpful learning tool, some experts suggest that young children don't use a piggy bank, but a glass jar, so they can see the money they collect. However, there are other visual teaching tricks you may want to employ.

Michael Tanney, director of the Magnus Financial Group, a financial advisory firm in New York City, suggests showing a child a bucket and putting it in a sink and then filling it up. "The water represents money. Turning the sink handles represents the job, and the bucket represents the bank," he says, explaining that if you spill all the water out of a bucket (or spend all your money, using the metaphor) and have none left, you must go back to the sink and work to earn more water (or money, in this analogy). "A bank account doesn't operate much differently," he says.

Talk to your kids about money

Even at a young age, kids should understand how you're getting the services and products you're receiving.

Stefanie Lewis, regional wealth planning manager for Wells Fargo Private Bank in Fort Lauderdale, Florida, points out that children see their parents paying for things in a variety of ways, and it isn't always obvious to them what's going on. "They see us use plastic cards to pay for some things, and coins and green paper for others. We buy lattes with our phones. We pay for gas through some invisible encounter between our wallet and the pump," Lewis says. "How do we expect our kids to understand money in the year 2019?"

The bottom line: Unless you explain to them how you're paying, kids won't understand how much items and services cost.

Stress the importance of curbing impulse purchases

If your child receives an allowance and spends their money on toys, books, candy and so on, there's an easy way to instruct kids on how to prevent buyer's remorse.

"When children begin spending their own money on toys or gadgets at stores like Target, we encourage Mom or Dad to save the receipts from those purchases," says Mike Earl, a financial planner at The Wealth Group in Minneapolis. Then, two weeks later, pull out the receipts and review the purchases together.

"The question for the child is: How much joy is he or she currently deriving from that item? Was it a worthwhile purchase? The idea here is to help children grow in mindfulness about their spending decisions," Earl says.

Discuss big purchases with your kids

"Kids hear everything you say, anyway, whether you think they are listening or not, so why not talk about money in an intentional way?" asks Lewis.

If you're making a significant purchase like a new car or perhaps taking a big vacation, Lewis suggests talking about what factored into that financial decision. "Did you save up for the purchase for a long time? Does the purchase have particular meaning or significance to you? Talking about 'the why' can teach your kids your values on saving."

Encourage teens to get jobs and earn money

If you have a younger teenager, you may want to suggest he or she look for opportunities to babysit or mow lawns for money. If you have an older teen, you might want to help them get a job at a restaurant or in retail. After all, if your teen starts working, he or she will appreciate all of the work you do – and what it takes to fund your family's lifestyle.

Help your children open a bank account

Even if your teenager doesn't have a job yet, he or she is probably getting money from an allowance or as a gift during the holidays. You can help your teen regularly monitor and set aside money in a bank account. Plus, if you link your teen's bank account to your own, you can make sure your child isn't making reckless spending decisions.

Show your kids how to map out a budget

"Sit down together and create a budget that includes categories and monthly expenses. Help them review the budget on a quarterly basis to make sure they stay on track," advises Jeremy Straub, CEO of Coastal Wealth, a financial firm in Fort Lauderdale.

While your child won't be paying monthly bills like a mortgage or water bill, if she or he pays for their own car insurance or cellphone bill, you can factor these extra expenses into a budget. You'll also want to think about whether you teen is saving for college or another major expense, and if so, you'll want to set aside savings and include these expenses in a well-laid-out budgeting plan.

Teach kids to use credit cards the right way

"When used correctly, credit cards can be a useful tool to build a solid credit foundation. When used incorrectly, it can give you headaches for many years to come," Straub says. That's why it's important to discuss the pros and cons of using credit cards, even if you don't feel he or she is ready to start using one yet. If you do feel your teen is ready, you can add him or her as an authorized user of your credit card. One benefit is that you can monitor your child's spending, and by serving as an authorized user, you may help him or her build credit. The caveat is you'll be responsible for making sure monthly payments are made on time. Teenagers younger than 18 can't get credit cards on their own, and even once they hit 18, it can be a little challenging. Keep in mind that your child will must have proof of income to apply for a credit card.

Introduce your kids to basic investing concepts

Relaying the differences between merely saving money and investing can help kids understand how to build a strong financial foundation. Brad Robinson, a portfolio manager at CornerCap Investment Counsel, a financial planning firm in Atlanta, says the day his 16-year-old came home with his first paycheck from a part-time restaurant job, Robinson had a talk with his son about growing savings and building wealth by investing.

"Since a picture is worth a thousand words, I cracked open an Excel spreadsheet and showed him the actual growth potential of his first paycheck with compound interest," Robinson says. "He was so impressed with how much more his money could be worth by investing it that he volunteered to put the first $500 he earns into a minor Roth IRA and is committed to contributing to it on a yearly basis."

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