Teaching your children about money is one of the best ways to prepare them for adulthood. Eventually, they’ll need to understand how to balance a budget and use credit cards responsibly while they also save for short-term and long-term financial goals. Including children in some of your family’s financial discussions and decisions is a great way for them to learn about money. Be sure to start these conversations when your children are young so they’re better prepared later in life.
Here are tips to help you incorporate your children into the family finances:
Look for teachable moments
Whether it’s filling out a check, paying bills online or deciding whether to make a purchase, you can use these moments to teach your children. Discussions about why you make certain purchasing decisions and the tradeoffs that you may make for those purchases can serve as a foundation for responsible spending. Ask for your child’s opinion, and in time, let them help you make these decisions.
Give them an allowance
You can tie the allowance to chores or not, but either way, work with your child to create a budget for this money. Depending on how old they are, you can use jars for each budgeting category or have your children deposit the money into their accounts. They can put a portion toward savings and spend some, just as they would an income. Discuss with your child how much money they’ll receive and what they’re supposed to use that money for. As your child becomes independent, you can tie the allowance to his or her expenses, which can include money for lunch, gas or going out with friends. If they overspend one week, be sure to take advantage of that opportunity to talk about ways to better manage their money in the future.
Encourage them to work
Whether they are working part time at a store, babysitting or doing odd jobs, they can use this income for their own expenses or save for future purchases. Set up savings and checking accounts for your children, and as they earn money, put a certain amount in each account to start the habit of saving early. If your child receives a W2 from their job, complete a tax return with them to teach them about the taxes they have to pay to the government and how to file these forms.
Hold family financial meetings
Discuss the household budget at a high level so your children understand how you allocate money as a family. Show them the bills you pay and go through the statement to explain the different categories and why you pay certain amounts such as fees and interest. Explain the importance of paying bills on time. Talk about how much money you put toward your financial goals each month, along with why you save money and what you save for. If you’re planning a big purchase like a vacation or home renovations, discuss these with your children as well as any compromises your family may make to achieve these goals. If your income changes, talk to your children about how this impacts the family budget.
Whether it’s time or money, giving back to those who are less fortunate is an important lesson to teach your children. Discuss with them the different ways they’re able to give, like donating items, volunteering or by giving money to a charity. Teach them how to research different charities and explain how their donation makes a difference so they understand the good they are doing.
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