As a parent, you want the best for your children. This doesn\u2019t necessarily mean you want them to have the best clothes, the latest toys or coolest gadgets. Most likely, it means you want them to be safe and secure. And you want to lay a foundation that they can build upon to do well in life.<\/p>\n
The question, then, is whether you\u2019re teaching your children a key lesson that will impact whether they will do well. That lesson is about money.<\/p>\n
\u201cWithout a working knowledge of money, it is extraordinarily difficult to do well in life,\u201d says Sam X Renick, co-creator of Sammy Rabbit, a children\u2019s character and financial literacy initiative. \u201cMoney is central to transacting life, day-in and day-out. Where we live, what we eat, the clothes we wear, the car we drive, health care, education, child-rearing, gift giving, vacations, entertainment, heat, air-conditioning, insurance\u2014you name it, money is involved.\u201d<\/p>\n
Yet, plenty of parents aren\u2019t helping their kids become financially literate. T. Rowe Price\u2019s 11th Annual Parents, Kids & Money Survey<\/a>\u00a0found that nearly half of parents said they miss opportunities to talk to their kids about money and finances. And a quarter said they are very reluctant or extremely reluctant to discuss financial topics with their children.<\/p>\n Kids, on the other hand, are eager for their parents to share their wisdom. Half of the children surveyed said they wish their parents taught them more about money.<\/p>\n Even if you\u2019re not teaching your kids, they will learn lessons about money one way or another. If you want to play a key role in shaping your children\u2019s feelings, thinking and values about money, you need to give them the gift of financial literacy\u00a0from an early age. Here\u2019s how.<\/p>\n Renick has been teaching kids about money through his Sammy Rabbit storybook character since 2001. He has found that the earlier you start a child\u2019s financial education process, the better. Lessons should begin before age seven, he says, because\u00a0research shows\u00a0that money habits and attitudes are already formed by then.<\/p>\n Once your kids are old enough to know they shouldn\u2019t be sticking pennies in their mouths, you should introduce them to coins and cash. Explain what money is and how it is used. \u00a0Actually, showing them how money works is more effective. So let them see you making purchases with cash.<\/p>\n Even if you pay with a debit or credit card, explain to your kids that you\u2019re using your money to make purchases. Chase Peckham, director of community outreach for the San Diego Financial Literacy Center, did this with his son and daughter when they were preschool age. When they shopped together, Peckham would show his kids receipts with the amount he paid. \u201cBy doing it over and over again, it became habit to them,\u201d he says. \u201cAs they got older, they started to understand. That\u2019s how we introduced money.\u201d<\/p>\n Peckham says that his son understood how money worked by the age of 4, thanks to the receipt strategy. He had more trouble getting through to his daughter. But, by being consistent, he knew that \u201cthe light bulb would turn on\u201d for her\u2014and it did.<\/p>\n Your kids\u2019 early interactions with money will likely involve spending. They see you using it to purchase things, including things for them. So it\u2019s important to teach them from a young age that money isn\u2019t just for spending\u2014they should be saving money regularly<\/a>, too.<\/p>\n Learning to save isn\u2019t just an essential money habit. \u201cSaving teaches discipline and delayed gratification,\u201d Renick says. \u201cSaving teaches goal-setting and planning. Saving stresses being prepared. Saving builds security and independence.\u201d<\/p>\n Help your kids get in the habit of saving by giving them a piggy bank or savings jar where they can deposit coins or cash. Then use short, simple messages to encourage your kids. Renick offers these examples:<\/p>\n With young kids, though, you\u2019ll likely have more luck teaching them to save for short-term goals\u2014such as a toy they really want\u2014rather than for the future, says Tim Sheehan, co-founder and CEO of Greenlight<\/a>, a debit card for kids with parental controls. The father of four says that encouraging his kids to set short-term goals when they were little helped them learn the value of delayed gratification. As they have gotten older, they are now able to save for longer-term goals.<\/p>\n Parents also can encourage their kids to save more by agreeing to match the amount they save dollar for dollar or by a certain percentage. If your children are old enough to advance from a piggy bank to a real bank, you could take advantage of a service such as Greenlight or FamZoo<\/a>. These prepaid debit cards and apps allow parents to transfer money to their kids and pay them interest\u2014at a rate of their choosing\u2014on any of the money the kids choose to stash in savings.<\/p>\n Kids need to have money of their own so they can learn how to make decisions about using it. An allowance can accomplish that. However, you should consider requiring your kids to do certain chores to earn their allowance. \u201cJust about everyone values money they earn differently than money they receive,\u201d Renick says.<\/p>\n Both Peckham and Sheehan say they wanted their children to learn that money is earned. There are some chores the kids have to do without pay because they\u2019re expected to help out as part of a family. But if they want to get paid, they have to complete certain tasks.<\/p>\n Sheehan says his two youngest children who are still at home get a weekly allowance in an amount equal to their ages. Peckham did that initially with his kids but says they now get a \u201csalary\u201d that is deposited directly into their bank accounts each month. His kids have negotiated raises for their salaries by agreeing to take on additional jobs around the house, he says.<\/p>\nStart With the Basics at a Young Age<\/h2>\n
Instill a Habit of Saving<\/h2>\n
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Create Opportunities to Earn Money<\/h2>\n
Help Kids Learn to Make Smart Spending Decisions<\/h2>\n