Help them open their first bank account.
A child's savings account is a great financial tool to teach them basic money management principles, including the benefits of saving over time. As your kids get older, you can upgrade to a checking account and have your kids use their bank account for basic purchases, giving you oversight into their spending habits to better guide their decision-making.
Give them a fixed spending budget.
A weekly or monthly spending allowance is a great way to teach kids about basic spending principles, as well as opportunity cost and other important principles of smart money management. An alternative to giving an allowance is to give them a commission as payment for completing chores or taking care of other responsibilities, such as homework. By connecting this money to responsibilities, your children can learn that money is earned, rather than given out freely, and they will connect the value of that money to the effort of their own labor.
Teach them about the risks of impulse buying.
A lot of sales tactics revolve around the premise of creating a sense of scarcity and a sense of urgency to make purchases while they're available. These strategies, while effective, tend to manipulate consumers into making purchases they might have decided against with a little more time to consider their purchase.
Additionally, kids often have impulsive purchasing desires and want the shiny object in front of them in that moment. By encouraging them to walk away and give a certain amount of time before opting to make a purchase, you can teach kids to control their own impulses and overcome these tendencies to make better decisions.
Get these books.
“When kids have some down time this summer, there are some great books they can read to learn about financial strategies they can use throughout their life. Young adults could benefit from the financial literacy book, "No One Ever Told Us That: Money and Life Lessons for Young Adults," by John D. Spooner. Younger children can still learn important financial lessons through books of their own. “O.M.G. Official Money Guide for Teenagers,” by Susan Beacham and Michael Beacham, is a great option for kids ages 10 and up. And kids as young as six can learn from “The Go-Around Dollar” by Barbara Johnston Adams.
Model Financial Wisdom Through Your Own Actions.
As much as you want to educate your kids about financial matters through your own lessons and instruction, kids learn a lot about money management by modeling the behaviors of their parents. You can help kids at any age learn from your own actions by demonstrating the money behaviors you believe are appropriate. As kids get older, invite them into discussions about bigger money matters such as saving for retirement and paying your bills, explaining why you make certain decisions and what the ultimate goals of your actions are.
Starting at a young age, kids have an opportunity to develop financial literacy skills that will benefit them through their childhood and into adult life. By taking an active role in this literacy development, parents can help instill lifelong habits and decision-making skills to help these kids make the most of their financial opportunities.