By Kurt Smith
Learn more about Kurt at NerdWallet’s Ask an Advisor.
It’s never too early to start teaching your children healthy habits, and that includes financial ones. From an early age, children begin to observe their parents in all areas of life, including their spending and saving and how they talk about money. Kids pick up on our attitudes about money just by watching us.
Start teaching your children healthy financial habits at a young age so they can begin to grasp and practice them early in life. Teaching these habits now will help your children become financially wise adults.
You can use everyday experiences to instill financial awareness and smarts in your kids. Here are five money-related habits that you can start teaching them right now. The first two can apply to very young children, while the last three are probably best with children 8 and up.
Children watch their parents and replicate many of their habits. What are your children learning from you about money? Be mindful of your spending around your children. Are you and your partner always getting the newest gadgets, cars or items for the house? Do you eat out a lot as a family? If so, your children are likely to develop an “I want it, I can have it” financial attitude, which could lead to some painful financial mistakes. Practice shopping on a budget, using coupons at the grocery store and making home-cooked meals early on. Even if your children are young, they notice these things and will learn to value money.
Learning how to delay gratification is a much-needed skill in today’s “have it now” society. Teach your children from an early age that when they go to the store with you, they don’t always get to leave with something. If they can’t stop talking about that new toy they want, tell them they can ask for it for their birthday or Christmas, or let them earn money by helping out with chores around the house. Through this, kids will learn discipline with spending and that they don’t always get to buy something when they want it. Once they start bringing home their own paycheck, it won’t be as likely to burn a hole in their pocket.
A great way to teach kids about saving is with the rule of thirds. When your children get an allowance or money for their birthday, have them put one-third into a long-term savings account like a 529 college savings account and one-third into a savings account for a bigger purchase like a bike or iPhone; the final third may be spent immediately. Let them go to the bank with you and deposit the money so they feel responsible for it. Show them the online bank statements each month and how their money is growing with interest. You can help them set goals for larger items they may want to buy or save toward, such as a new bike, a play kitchen or even a trip to Disneyland.
You can take your children shopping with you and compare prices with them on a variety of items so they see the value in what you can buy. Show them two shirts at different prices and explain why they’re priced differently (material, sale or brand name). Take them to the grocery store and show them how the same food item can have two different prices and let them help you decide which one to buy. When you go shopping for back to school, set a budget and have them get the clothes they need — within that budget. Teaching them about comparison shopping while they’re young will help make it a habit, so it becomes automatic as they get older.
If your child saves up enough money for something you think he’ll regret buying later, let him buy it anyway. Kids will remember spending their savings on a toy they used only a few times and may make different choices in the future because of that painful lesson. It’s better for them to learn consequences now than when they’re older and the consequences are much greater.
Teaching kids healthy money habits when they’re young will help ensure they become financially responsible adults. They can build on that solid foundation from childhood as they start to learn about credit, interest rates and smart borrowing. Giving them the building blocks early on will allow you to reinforce increasingly complex and important lessons as they grow. Helping your kids build healthy money habits is one of the best things you can do for them as a parent.