Teaching kids about money management is crucial for helping them grow up successfully—but talking about money can also be difficult for parents. How do you teach your children and teenagers to earn, save, give, and spend well when they’re bombarded with conflicting messages on how to responsibly use their money? And in a country in which earning and spending habits are intensely personal, how do you bring up the topic of kids’ money management in the first place?
- The average financial literacy score for high school students is an F. This score has fallen to its lowest level ever.
- While 75% of adults say it’s important for adults to give financial guidance to children and teenagers, only 36% of adults actually do so.
- Teenagers’ financial literacy increases significantly when they go to college; however, only 25% of Americans graduate from college, leaving 75% ill-equipped to make financial decisions.
- The more Developmental Assets that kids have, the more likely they’ll make smart money management choices. While 72% of young people who have Developmental Assets save money, only 27% of young people with no Developmental Assets save money.
Teaching Kids about Money Management
Kids are very observant, and they pick up on what their parents do and say, so be sure to set a good example when you’re dealing with money. Make it a point to teach kids about money management not only by what you say, but also by what you do.
- Make a Budget; Stick to It: If you have to cut back on some things, let your kids know that it’s because those things don’t fit in your budget plan. Talk about money-related decisions that you have to make based on your budget.
- Practice Good Spending Habits: Compare prices or use coupons before you make a significant purchase. Ask your kids to help you make the best decisions, talk about money management skills with them, and help them understand your spending practices.
- Teach Kids About Spending, Saving, and Sharing: Kids may think they should keep all of their money for themselves, but showing that you care about helping others sets a powerful example. Decide on a percentage you will give each month to a nonprofit organization, school, or other charitable cause.
- Don’t: Use your credit card to purchase things you can’t afford. This can be an especially appealing (and dangerous) money management practice for teens.
Parenting in a Recession
- Do: Loan your child money. For example, if your child wants to buy a bicycle, have her save up a certain amount for a deposit and then figure out a payment plan (and stick to that plan every step of the way) until it is completely paid off.
- Save For Now and Later: Encourage your kids to save for things like a new bike or a concert ticket—and in the long term, for expenses like college tuition or a car. Having a savings goal makes the budgeting process more real and tangible.
Talking With Your Kids About Money
- Practice What You Preach: Remember that your children learn from all members of your family, whether they’re talking about money or not. Make sure everyone is practicing good saving and spending habits to reinforce the messages you’re sending to your kids.
Like anything else, financial literacy is best taught by intentionally setting a good example around your children. If your kids see you and other members of your family making well-informed, well thought-out, and responsible decisions about money throughout their childhood, they’ll be much more likely to make good decisions themselves. Make it a point to set a good example around your kids—and don’t forget to talk about money management with them to reinforce these ideas!