7 Things Parents Should Teach Their Kids About Money
Lesson 1: The value of hard work
Parents can teach their children the value of hard work and how it can lead to financial success by instilling a strong work ethic and demonstrating the benefits of effort and dedication. Here are 3 practical ways to teach this:
Lead by example: Your children learn from you. Exhibit a strong work ethic yourself by setting routines, striving towards goals, and showing persistence despite obstacles.
Encourage responsibility & independence: Assign age-appropriate chores (e.g. cleaning, laundry, household tasks) to teach your kids the importance of hard work. They will develop pride and a sense of accomplishment by making an effort to complete tasks.
Provide opportunities for work experience: Boost your child’s work ethic by exposing them to diverse work experiences (summer jobs, volunteering, internships). This will help them experience responsibility, accountability, and workplace success.
Additionally, recognizing and rewarding your kids' hard work with positive reinforcement, financial incentives, or celebrations of achievement is essential to sustain their pride and motivation.
Lesson 2: The importance of saving
Money-smart parents teach their children the importance of saving. This includes saving a portion of their income, making wise investments, and avoiding overspending on unnecessary items. Here are 3 practical ways to teach it:
Lead by example: Show your children how you save and budget. Your children will understand the importance of saving when they see you doing it.
Distinguish wants and needs: Teach your children to prioritize spending by understanding the difference between needs and wants and emphasizing prioritization of necessities.
Encourage savings: Set up a savings account for your children and encourage regular deposits. Explain how interest can grow their savings and motivate them to save for specific goals. This will help them understand the value of saving.
Lesson 3: The power of compound interest
Money-smart parents teach their children about the power of compound interest and its role in growing their money over time. This includes the benefits of long-term investing for achieving financial goals. Here are 3 practical ways to teach it:
Explain with real-life examples: Teach the concept of compound interest using practical examples like retirement savings and your children's savings accounts. Show interest accumulation and its impact on the final amount.
Teach with a game: Create a fun game where your kids have a pretend bank account. They deposit a certain amount monthly and calculate the interest earned and total amount after a period.
Invest in a savings bond: Buy savings bonds to show your kids how bonds grow and interest compounds over time, resulting in long-term savings growth.
Lesson 4: The dangers of debt
Money-smart parents teach their children about debt and how ignorance or mis-use of it can lead to financial struggles. This includes the importance of managing their credit and avoiding overusing credit cards. Here are 3 practical ways to teach this:
Role-playing games to teach about debt: Act out scenarios of struggling to pay off debts, so that they grasp the importance of responsible financial management.
Budgeting exercises: Guide your children in creating a budget to live within their means, including saving for emergencies and big purchases.
Real-life examples of debt: Share stories of people your children know who have struggled with debt or lost possessions due to debt, to show the consequences. Discuss about people they know who have managed their finances responsibly and have financial stability, to highlight positive examples.
Lesson 5: The importance of giving back
Money-smart parents teach their children the importance of giving back to their community and how it positively impacts others. This includes teaching them about charitable giving and how it helps those in need. Here are 3 practical ways to teach it:
Lead by example: Volunteer, donate to charity, or help others in the community. Your children will understand the value of giving when they see you doing it.
Encourage your kids to do community service: Involve your kids in projects like cleaning a park, visiting a nursing home, or fundraising to demonstrate the impact of their actions.
Discuss giving's importance: Have honest conversations with your kids or share books & movies that highlight the impact of giving, helping them understand the value of being selfless and compassionate and their ability to make a difference in others' lives.
Lesson 6: The importance of budgeting
Money-smart parents teach their children the importance of budgeting for effective money management. This includes teaching them about tracking their income and expenses, setting financial goals, and avoiding overspending. Here are 3 practical ways to teach it:
Involve your kids in budgeting: Give them tasks like tracking expenses, categorizing them, and creating a grocery list based on the budget, to make budgeting fun and interactive.
Teach the concept of saving: Encourage your children to set aside part of their allowance or earnings for future expenses to understand the value of money and budgeting.
Real-life examples: Using real-life examples, explain the consequences of overspending and not having enough to pay bills or buy essentials. This helps them understand budgeting in real situations and makes the concept easier to grasp.
Lesson 7: The value of education
Money-smart parents emphasize the importance of education for financial success. This includes encouraging their children to pursue higher education and providing them with the resources and support they need to succeed. Here’s 3 practical ways to teach it:
Lead by example: Be a role model by pursuing learning opportunities, inspiring your kids to take education seriously and understand the benefits of continued growth.
Encourage exploration: Support your kids in trying new things and exploring their interests to boost their sense of empowerment through education.
Provide learning resources: Give your kids access to educational materials such as books, toys and online games like MoneyTime to foster critical thinking and a love of learning beyond the classroom.
In Conclusion
There is plenty your kids can learn from you about money, even if you only implement a few of the ideas above. Additionally, if you’d like a fun way for your kids to learn money management, MoneyTimes’ personal finance lessons for kids help your children learn about money by making their own financial decisions within the safety of the program.