Make kids’ finances a life lesson

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Financial matters as an adult are one thing — quite another as a youngster. How soon do you teach children financial skills? Is there a too soon?

Stacy Smith of Experian, the leading global information services company, and Rod Griffin, director of public education at Experian, talked about the why and when of teaching children about finances.

“Kids and money are so important,” Griffin said. “Teach them early so they don’t make our mistakes.

“What we teach them and show them as children, they will reflect in their lives as adults,” he said.

Managing money is a life skill — like any other — branded into kids from little on up. Unfortunately, it’s a skill not taught in school. This makes parents’ roles even more important.

“Teaching kids about saving money can help them avoid credit card debt, overspending and poor financial practices in the future,” Smith said.

Never too soon

There is no too early to learn about money. Kids will pick up from parents’ habits sooner than any of us thinks.

“Kids will watch your behavior before you even know,” Griffin said. “Show them how to use money before you talk to them.”

Youngsters are good at picking up cues, whether you want them to or not.

“The sooner parents teach children about money, the more effective they’ll be in raising financially successful adults,” Smith said.

The most important lesson for kids is to pay bills on time and not to flaunt extra cash. Those aren’t formal lessons, but habits they’ll learn through osmosis.

Smith cited an article from Experian: The Future of Financial Literacy: Talking Money with Kids.

“Teach children that money is earned, not given,” Griffin said. “Plus, you should give some of the money you earn back to society.”

Watch and learn

There are practical ways to teach kids about money. For instance, let them watch as you balance your check book, do your online banking or go along to the bank. Kids pick up on all your habits, including financial.

“Apply money lessons into games,” Smith said. “Involve kids in your finances. Let them help you budget and grocery shop.”

Lessons can also result in sweet rewards.

“Tie money lessons to something they want,” Griffin said. “We used stopping for ice cream to teach about saving.

“Spot opportunities when they are with you,” he said. “It doesn’t have to be a, ‘Sit down, we’re going to talk about money,’ talk. Make it conversation, not lecture.”

Want or need?

Kids also need to learn the difference between needs and wants. Start teaching them by not giving them everything they want. Spoiled kids grow up with little sense of values.

Allowance Academy has an article about wants vs. needs: Teaching Kids About Money.

Kids also need to see that credit cards are not automated teller machines. They are debts to must be paid — again, sooner rather than later.

“Credit is a financial tool,” Griffin said. “Debt is a financial problem. It’s not free money.”

To help explain, The Balance has a comprehensive article called 8 Lessons to Teach Your Child About Credit Cards.

Be charitable

Parents can parents teach kids about the importance of saving and charitable giving.

Kids should see their parents saving habits and know when they donate to charities — and why. Preferably, there are more noble explanations than tax write-offs.

“We can often show them more effectively than tell them,” Griffin said. “Giving is a behavior that is copied as much as learned.”

Smith said giving should be more than a paperwork exercise.

“Make it a family activity,” she said. “Encourage everyone in your household to participate in volunteer activities.”

Financial conversations can evolve as kids get older. From simple money matters, talk about why money has to be set aside for college and the role the kids must play in it.

JumpStart has kindergarten through 12th grade standards for financial education,” Griffin said. “It’s a great guide for how talk might change.”

Smith said the changes should be gradual.

“Start with simple ideas such as allowance,” she said. “As the kids get older, discuss more complex topics such as budgeting and planning.”

Teaching time

Parents can turn their children’s financial mistakes into teachable moments.

Explain to kids that financial mistakes aren’t the end of the world. At the same time, don’t bail them out — at least not without a payback. Teach them there are no free lunches.

“Stop the cycle of bad money management,” Smith said. “Teach them where they went wrong so they don’t repeat the same mistakes.”

Griffin said it’s best to keep your eyes open for errors before they occur.

“Don’t wait for a mistake,” he said. “Talk with kids about the decision before they make it. Ask them why they want that thing.”

Even parents struggling with their finances can teach their kids good money habits.

Sharing financial challenges will give kids an appreciation for their parents’ efforts. It’ll help teach them that life is not a blank check.

JumpStart also has a free online library of financial education resources.

“Kids are remarkably brilliant,” Griffin said. “Be honest and explain why you have to say no. You will be surprised what they understand.”

About The Author

Jim Katzaman is a manager at Largo Financial Services and worked in public affairs for the Air Force and federal government. You can connect with him on Twitter, Facebook and LinkedIn.