To secure a healthy financial future, you need to practice healthy financial habits. While this is true for people of all ages, it can be especially beneficial to start learning about money management at a young age. The question that parents then face is, “Where do I start?” While it may seem challenging to make financial literacy interesting and exciting for kids, there are easy ways to start integrating those lessons into their life. Rather than jumping into lengthy explanations about finances, it may be better to start with the basics and to show kids how money is used in everyday situations.

Let Kids Earn Money

If you plan to start teaching your children about money, then it’s helpful to begin by giving them some. Better yet, you can take this as an opportunity to let your kids earn an allowance. By providing an allowance, you not only teach your children that money is earned, but you are also giving them the means to experiment with responsible budgeting and saving.

The amount of money that you decide to give as an allowance can depend on several factors, including the child’s age and your own budget. Once this amount is decided on, you can then determine if you’d like to tie the money to certain chores, good behavior, or a combination of both. As your kids become more comfortable with earning money through work, you can even offer to increase their allowance if they agree to extra tasks!

Introduce Budgeting

Now that your child has some cash on hand, you can start teaching them about the basics of budgeting. One common way to introduce this concept is by using an envelope system. Rather than letting kids put all their allowance money into one piggy bank, the envelop system has them divide the funds into two envelopes: one for saving and one for spending. This then teaches children how to manage their money and make decisions about what it will be used for. Plus, as kids get older and start to experience greater responsibilities, you can introduce the concept of putting money aside for needs such as car or phone payments.

One other way to help kids learn about budgeting and financial decision making is to get them involved in the shopping process. For instance, you can ask kids to compare the prices between toys in the store or help them stay under a set spending limit while back-to-school shopping.

Be Smart with Savings

Along with budgeting comes the topic of savings – one of the most important concepts to teach children when it comes to financial literacy. The easiest way to start saving is by letting children set a goal and then teaching them to set aside a small portion of their allowance to use toward that goal.

For younger children, short-term goals are best, such as saving for a new Lego set or Barbie doll. Once they have reached their savings goal, it may be good to ask if they’d like to spend the money or keep saving it for something bigger. By doing so, you not only teach children what saving can do for them, but you also teach them to appreciate delayed gratification and the discipline of goal setting.

Tweens and teens may also experience short-term savings goals, such as saving for a prom dress, a school trip, or new clothes. However, it is likely that they will also have long-term goals you can teach them to save for. For example, you can let your older kids contribute to their college savings or have them set money aside for a car once they get their license. Even encouraging them to save at least half the cost can still help older kids feel comfortable with planning and saving while allowing them to feel accomplished by contributing financially.

A Bank Account is a Responsibility

As children grow up and get more comfortable with money management, you can start to consider opening a bank account for them. In fact, there are many financial institutions who offer accounts specifically designed for children and teenagers.

For children who still haven’t hit their teenage years, you can consider opening a savings account only. Yet for older children, opening a checking account and even providing them with the responsibility of a debit card can provide key preparation for the financial responsibilities of adult life. Not only does opening a bank account teach kids how financial institutions work, but it also introduces greater financial concepts such as balance management and interest.

Be a Good Role Model

You know the phrase, “Practice what you preach?” Well, it applies to financial literacy as well. If you are trying to teach your children about budgeting and saving while going on shopping sprees yourself, then it’s likely to send the wrong message. Be sure that you are practicing good money management skills as well so you can act as a positive financial role model for your kids.

Similarly, don’t be afraid to engage in conversations about your own finances with your children. Whether it’s as simple as discussing the budget you set for the grocery store or talking about the savings goal for a family vacation, having open conversations about money can help remove any stigma around it. As a result, you will also encourage your kids to have these same conversations in the future when they share finances with a partner or become financially responsible for their own families.

Summary

There are plenty of ways to introduce the key concepts of financial literacy to children of all ages. By starting with the basics and slowly introducing more complex financial topics, you can help your children create a good understanding of how money works and how to manage it responsibly. With a solid foundation in place, you’ll have no need to worry about your children’s ability to take care of their future finances responsibly.