Regardless of the age of your kids, learning about financial responsibility is an essential life skill. From learning how to balance a budget to spending responsibly to saving for the future, teaching about money can help set up your kids for financial success. Research shows that children who are given opportunities to manage money at a young age are more likely to be financially responsible when they become adults.1
"It's evident that what parents do when their kids are young affects their financial outcomes later," said Dr. Ashley LeBaron-Black, Brigham Young University professor of family life and lead author of the study. "Beyond talking about money management, it's really important for parents to give kids an opportunity to manage money and make decisions with money from a young age."
Long story short: as a parent, teaching about money to kids has a bigger payoff later in life. To help get your kids on the right path financially, consider these tips and tricks for how to teach financial responsibility to kids.
How to Teach Financial Responsibility to Preschoolers
Some people assume that kids won't understand money concepts at such a young age, but learning money skills is similar to learning to count. Your little ones will likely need some guidance, but here's what you can do to get them to understand basic money concepts.
Count coins and bills
At this age, your kids will have already been introduced to numbers. You can take things a step further by showing them different coins and explaining their worth. Then do the same thing with bills. Once they start learning math, you can do math exercises with them with coins. For example, two dimes make twenty cents.
Get them to shop with you
If you're already taking your kids to the grocery store, a simple thing you can do is talk to them about the cost of goods. For example, when picking up their favorite snack, tell them how much it costs. You could also explain to them why buying things on sale is a good value.
Introduce a piggy bank
There's a good chance that your kids have already received money from their grandparents and other relatives as gifts. Have your kids put their money in a piggy bank and explain that a bank holds their money until they need it later. Every so often, you can open the piggy bank and count how much money they have. If they want to purchase something, let the kids use their own money.
How to Teach Financial Responsibility to Grade Schoolers
Once your kids hit grade school, you can introduce them to budgeting, bank accounts and more. The key is to keep things simple, fun and engaging.
Open a savings account
A piggy bank is good for the first few years, but you'll eventually want to open a savings account for children at a bank. This will give them a better understanding of how banks and money play a part in our daily lives. Best of all, many kids' bank accounts pay interest, so you can teach your kids that you can make money by saving money.
Introduce delayed gratification
Once you've introduced your kids to basic money concepts, it's time to take things to the next level. Delayed gratification is one of the most important things you can teach them. Let them know that they can buy whatever they want if they have the money for it, but if they save their money, they can save up to buy something that costs more and might be more meaningful for them.
Give your kids an allowance
The concept of an allowance dates back about 100 years.2 Some American parents tie allowance to completing work around the house.2 It's a simple concept: as your kids complete chores, you'll pay them when the chores are done every week. With your kids earning some money, they'll be able to implement some of the skills you've already introduced.
Make a budget – and put it into practice
Making a budget can be fun, even for kids, but putting it into practice offers valuable lessons in financial responsibility. For instance, one thing you can do with your children is to meal plan with a budget. Give your kids $20 and tell them they need to come up with a meal for the family. Set some rules for them, such as there must be protein, starch and vegetables. You could research online how much all their decisions cost to ensure they stay on budget. When you're at the grocery store, let them gather all the things they planned for and have them pay the cashier. Alternatively, you can practice budgeting with your kids with an app such as Rooster Money and iAllowance.
How to Teach Financial Responsibility to Teenagers
Once your kids become teenagers, they're likely looking for more independence. Some age-appropriate apps aimed at teenagers and young adults include Mint, Tip Yourself and Plan'it Prom. If you want to be more involved, you could also try the following:
Share available resources with them
Since your kids would have been introduced to some money concepts, they may be interested in learning more. Instead of trying to lecture them, let them explore on their own. For instance, the Riverstones Vista Capital Money Matters blog covers topics from understanding cash-back credit cards to whether to invest in NFTs. It's a great resource that allows teenagers to learn about topics they're interested in.
Talk about career options
Share with your kids what you do, how much you make and what education/training you completed. This will show your children that having a successful career requires hard work. It's also a good idea to talk to them about any jobs they're interested in pursuing. Have them look into the qualifications, expected salary and anything related to the job. You want to open their minds to different career possibilities.
Teaching Financial Responsibility to Young Adults
By now, your kids should have a very strong financial foundation. That said, there are still a few things you can recommend that can help. Getting a credit card in their name can help them build a credit history. In addition, signing up for a high yield savings account can be beneficial since they typically pay more interest than traditional banks.
The Last Word
Pointing your kids in the right direction is just one part of the process. You need to have open discussions about money with your kids and lead by example for all of the financial concepts to stick. By giving your kids the opportunity to make financial decisions for themselves, they will hopefully make better choices as they enter adulthood.
Barry Choi is an award-winning personal finance and travel expert. He regularly appears on various shows in Canada and the U.S., where he talks about all things money and travel. His website - Money We Have - attracts thousands of visitors daily, looking for the latest stories on travel and money.
LEARN MORE: How to Talk to Your Tween About Money: 6 Strategies to Help
Sources
1. Emily Lambert (September 23, 2022) "Study shows children need hands-on experience to learn financial responsibility" Phys, accessed December 21, 2022
2. Joe Pinsker (December 26, 2018) "The Way American Parents Think About Chores Is Bizarre" The Atlantic, accessed December 21, 2022