Teaching your children about personal finance is one of the most important things that you can do to help them succeed as adults. Understanding the value of a dollar is a key part of knowing how to make sound financial decisions.
Here are three ideas for how you can teach your children about this important concept so they may grow into financially intelligent and independent adults.
1. Show By Example
Like many things in parenting, the best way to teach your kids about the value of money is through your own example. If spending your money wisely is something you've always struggled with, perhaps knowing that your kids are watching will give you added incentive to solidify your financial future.
Here are a few ways that you can teach the value of a dollar by example:
- Involve your children in financial decisions where it makes sense.
- Use cash when appropriate, especially around younger children who may not understand the concept of debit and credit cards.
- Talk about the tradeoffs involved in your regular budget. "We can't buy X because we're saving our money for Y."
- If you give your child an allowance, assign a value to their chores based on the amount of time you expect the task to take.
2. Teach Early and Often
It's a great idea to start when your kids are young. Even elementary-school children are old enough to begin understanding the relationship between money and goods. One way to illustrate this is by enacting a toy "cap." If your child is asking for a new toy, have them pick a toy to put away, sell, or donate. That can help them start to understand that it's not always "get, get, get."
You can begin a conversation about ways for kids to make money. These days, age is no barrier to the spirit of entrepreneurship. Not to mention that coming up with a business concept and seeing it through is a surefire way to see the value of one's dollar in action.
3. Give Your Kids Control
Continue these lessons as your children get older. Lessons about money and personal finance can start to sink in as you repeat them over time. As kids start to understand more about money, they are also usually ready for more responsibility.
While cash usually works best for very young kids due to its tangible nature, as your children age, consider a GoHenry debit card. This debit card for kids allows you to set category limits, manage spending, and review transactions. Tracking spending with your child can lead to teachable moments.
Another idea that can teach kids about the value of money is to teach them the difference between a need and a want, and help them research or comparison-shop when it is time to spend what they've saved up for a new toy, app, or other entertainment. Teach them how to shop wisely or why prices are different for the same item at different stores. You might also explore the tradeoffs between paying for online shipping or saving money by using your time to go to the store to buy an item.
As your kids become older and start working, you can help them translate their hourly wage into the cost of things they want to buy. When kids and teens understand that they would need to work two full days to afford that new pair of shoes they had their eye on, it helps to put it in perspective and allows them to make an informed decision.