There's a reason lawmakers have been pushing to have financial education incorporated into the classroom. Teaching children to manage money when they're young could help them avoid financial pitfalls later in life. If you're eager to set your kids on a solid financial path, it pays to talk about money at a young age. Here are a few ways to get your children interested and schooled in personal finance.
1. Give them an allowance to manage
Once your children are old enough to understand the concept of money and what various bills and coins amount to, it pays to set them up with an allowance. This age might vary from child to child, but often, kids are ready for an allowance by about second grade. That allowance doesn't have to be large—it can be a dollar a week if that's all you're looking to part with. The point, however, is to then put them in charge of making the most of that cash.
You'll want to review the benefits of spending their allowance versus saving it. In fact, it's a good idea to open a savings account for each of your kids so if they want to sock their money away safely, they can.
Once your kids are a bit older (say, third or fourth grade), you can even review the concept of interest and help your children track the amount they're earning on their savings. Granted, these days, that may not be much, but it's still a good concept to teach.
2. Show them what it means to budget
One reason so many adults run into problems with debt is that they don't stick to a budget. And so it's important to get your kids into that habit early.
You can accomplish this a couple of different ways. First, you can set up a mock budget to give your kids a sense of what a family's expenses might look like. Or, if your children are older (you may want to wait till about fourth or fifth grade for this one), you can share your actual household budget with them. That way, they can see what your various bills cost and perhaps gain an appreciation for the luxuries you treat them to.
3. Work toward goals together
Getting into the savings mindset isn't easy—not for grown-ups or kids. But if you show your children what they stand to gain by becoming good savers, they may be more willing to embrace the idea.
It pays to see if you can work toward a specific financial goal together by having your kids pool their allowance money and having the adults in your house cut back on leisure spending to eke out extra savings. That goal can range from a family night at the movies to something loftier, like a trip to Disney World. The key is to work together and figure out strategies for building up savings—strategies that your kids will hopefully hang on to and use later in life.
Teaching your kids about personal finance could set them up for success as adults. Use these tactics to get the process started. With any luck, they'll learn a lot, and you'll even have some fun along the way.