Teaching Financial Habits to Your Children

Moms care so much about their children’s physical and mental well being. Focusing on their financial well being is essential to support the other two aspects.

This is a guest post by Angie Picardo, a staff writer for NerdWallet.

From Board Games to the Boardroom: Teaching Good Financial Habits to Your Children

Up until I was about 18, the extent of my financial education was the oft-bandied idiom, “a penny saved is a penny earned.” I had been working after school since 14, had my own savings account at the local bank, knew my fractions and percentages, and was vaguely aware of the adults conversing about the stock market, but I hadn’t the vaguest clue as to the value of a dollar beyond what it could buy me in my town.

Related: 8 Really Unique Ways Of Teaching Kids About Money

Even in college, when I learned how to budget my meager savings and evaluate the loans I had taken out, I had little awareness of the wider financial world or its impact on my career and retirement.

Chances are that you were in a similar situation. And 50 years ago, this might have not been a problem. You would have a career, get a pension, and invest in a few stocks and bonds with some extra savings. But we live in an age of ever-increasing financial complexity, and if you want the effect of your hard-earned savings to help out your children for years to come, it is vital that they are equally as knowledgeable when it comes to their finances.

Now, I’m not saying that you need to drill your preschooler on how LIBOR is calculated or the Bretton Woods Conference, but by slowly nurturing your children’s financial awareness, they too can take advantage of their two best allies in finance – their parents and compound interest.

Bantering about Bonds

The first place I noticed money was in the grocery store; every week, my mother would pack me and my brother into the back of the car and off we would go to the grocery store, where we would terrorize her about some cereal or candy that our lives depended on. Having no concept of a budget or obesity, we were unable to comprehend why we couldn’t simply have everything. This is the perfect place to introduce basic financial concepts.

• Practice math and finance at the same time – ask questions like, “If we have $10 and pop-tarts cost $3 a box, how many boxes can we buy?”
• Go over receipts with your children while writing your shopping list. Show them the prices for last time and compare them with this week’s items. Set a budget and have them keep track of how much is being spent.
• If you generally indulge your child’s desires for something, instead give them a small amount of money, along with the option of saving it for next time, perhaps even with interest. For example, “I know you want to buy everything, but these things cost money, so I’m going to give you $3. But, if you wait, next time we come to the store I’ll give you $7: $3 from this trip, $3 for the next trip, and $1 for waiting.

All these games serve as ways to introduce your child to concepts in an age appropriate manner. Obviously, these are geared towards younger children, but they’re fun, educational, and lay a good foundation.

Will Mow The Lawn For A Mutual Fund

Once children get to ten to twelve years of age, there are two further steps that can be taken to help them down the road towards Wall Street. The first is chores; the second is the family budget.

• Turn the fridge into a bank by posting each child’s income through chores and savings. Note deposits and withdrawals as well, and watch as the numbers grow and shrink.
• “Borrow” money from your children, explaining to them that you will return it with interest in a week. As a corollary, offer to “lend” them money for something they want but don’t have enough money to afford through chores.
• Depending on your family situation, consider including them in the weekly budgeting process, introducing them to thinking not just about money now, but also money in the future.

These three tips require a little more effort and a little more time, and at the beginning it may same like all your child can see is the money in their account now, but with time they will come to understand these concepts, and when they do, it’s time for:

A Real Job???

Children in the U.S. can start working at age 14, with some limits. A summer job, a few hours on the weekend or even just a few hours a week after school are all great ways to introduce teenagers into the wonderful world of working. At this age you can start talking to them about:

• Taxes. When they get their first paycheck and see a chunk taken out, talk to them about why there are taxes: social security, their school, etc. This is a great point to start looking at the bigger picture.
• Retirement. Hopefully you’re saving already, but what you may not know is that anyone can open a Roth IRA as long as they have documented earnings for the year. Go down to the bank with your child, open a savings account with them, and talk to them about opening a Roth IRA as well. For every dollar they earn, you can put a dollar into the IRA.

After fourteen years of careful tutelage, your children will have a wonderful foundation. You care so much about their physical and mental well being. Focusing on their financial well being is essential to support these other two aspects. Do them and yourself a favor and try out some of these tips in your day-to-day life.

Angie Picardo is a staff writer for NerdWallet. Her mission is to help consumers stay financially savvy, and save some money with the best checking account.

_{Photo Credit: Free Digital Photos/stockimages}

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