As a parent, you’re constantly imparting life lessons on your children—even if you don’t realize it. Kids are excellent at observing your behavior and forming their own habits based on what they see. When it comes to money, it’s crucial that you actively teach them how to be thoughtful with their spending.
Not only will these lessons benefit your little one, but it will also force you to reexamine your own relationship with money as a responsible adult. Take a look at some of the key lessons that can benefit the financial mindset of the entire family.
Rethink Your Child’s Allowance
Many parents partake in the tradition of giving their kids a weekly or monthly allowance. While it’s great to allow children to handle money and make their own decisions about how to use it, simply handing over a lump sum every week for no reason can send mixed signals to their developing brains.
Use allowance to reward hard work, whether that be through chores around the house or excellence in school, instead of an effortless flow of cash. Kids must learn from an early age that money is earned and not simply expected. There isn’t anything wrong with gifting them a $50 on their birthday, but the majority of the money they control should come as a result of working for it.
By adjusting the terms of your child’s allowance, you’ll be able to create a family dynamic of gratitude and responsibility. Everyone should be putting in effort to earn what they’re paid, including your kid. This practice will serve them well later in life and add a positive, goal-oriented atmosphere around the house.
Allow Money Mistakes
The most impactful learning experiences come from failure. Instead of never allowing your child to make an impulse purchase on a useless item, let them squander their money to see the consequences firsthand. While this may sound harsh, it’s important that kids make these mistakes when it’s only $20 and not $20,000.
Of course, always counsel your kid against the bad purchase. But if their little heart is set on it, allow them the autonomy to make their own decisions and deal with the fallout. This will help your children learn to be more thoughtful about how they handle money and it teaches them the critical skill of understanding opportunity cost.
This lesson is always a good reminder for the whole family to look toward long-term goals instead of short-term satisfaction. It’s also a great lesson in teaching your kids how to get back up after a loss—something you might need to remember the next time the stock market takes a bad turn or you make a financial fumble.
Teach Them About Debt
Even though it may be many years before they have their own credit card, it’s never too early to educate your children about debt. Clarify the different kinds of debt and how it can both help or hinder your goals. If you have experience with owing money, tell them about it. Instead of pretending you’re Superman, let them know that even their role models can have financial woes.
No matter their age, it’s always a good idea to teach kids about the dangers of overspending. If you’re child is older, talk about “good” debt and how it can help you with a long-term investment, such as higher education or a home. These money talks may help you reevaluate your own debts and help you plan for the future as your children get older. You may have lost track of some things in the chaos of everyday life, so teaching your little ones is great reminder to be more thoughtful about the money you owe.
Encourage Charitable Donations
Valuing the needs of others above your own is a learning process that will take many years. Jumpstart your child’s interest in philanthropy by teaching them how to give money away. Whether this happens during the holiday season or you mandate a certain percentage of their allowance goes toward charity, it’s incredibly impactful for children to experience how giving can also be receiving.
The advantages to this lesson is a no-brainer. Encouraging donations is a good reminder for everyone in the family to be grateful for what they have and help out those who are less fortunate. Not only will this be deductible on your taxes and hopefully save you some money, but it will also bring the family closer together through acts of kindness.
Money can be a taboo subject in many households, which often leads to poor financial skills later in life. Take the time to educate your kids early on about thoughtful money habits and watch as your whole family follows suit.