Education

Five Ways to Teach Children the Importance of Financial Responsibility

Perhaps one of the most valuable things you can teach your child at a young age is to have a basic understanding of money and watch as these financial responsibilities develop as they get older. Since children today are regularly exposed to an overload of information from the media and internet, it’s likely that they might learn these fundamentals from another source. Values such as earning, saving, and budgeting are crucial for developing a healthy relationship with finances, no matter your age. It’s important to set a solid foundational understanding of how money affects your life, both now and in the future. Not sure where to start the conversation? Here are some simple concepts you can teach your children about adopting best practices with finances.

Explain the Value of Earning

The first concept that children can begin to understand is how someone gets money. It’s important for children to understand that money doesn’t “grow on trees” but rather it’s something that is earned in exchange for hard work. A good way to explain this concept is by setting up an allowance system that lets your child earn their own money in exchange for chores around the home (CNBC 20191). This will help them to develop a concrete appreciation for the value of money.

Show the Value of Budgeting

Since many adults themselves still have a difficult time understanding how to budget, what better time is there to teach someone about the benefits of budgeting then when they’re young! Once they’ve developed an understanding of earning their own money, it’s time to teach them about setting aside portions of their earnings for different things in order to save up for something special that they otherwise wouldn’t have been able to afford (Money US News 20152). And as they grow older and begin accruing their own expenses, help them to see how those new items fit into their existing budget.

Show the Value of Saving

The value of budgeting also ties into the value of saving. While children won’t fully comprehend the need for emergency funds, you can show them how valuable it is to have money set aside in case something come up, such as wanting to buy a friend a birthday gift or finding a new toy they’d like to have for themselves. Need a visual representation of a savings account to strengthen the concept? Set up a clear jar that they can fill over time with their saved funds and watch as it grows week after week (Parents.com 20113)!

Explain Banking

Taking your children to the bank and helping them to open their own account is a great life lesson. Many children have this skewed idea that the bank just gives money to their parents without there being any conditions, so it’s a helpful lesson to show them how a bank is a tool for being financially responsible at all ages (Money US News 20152).

Introduce Responsibilities

As children get older, it’s important to make them take on small financial responsibilities so they can learn firsthand what it feels like to have bills. As older children and teenagers get their first cell phone, it would be worth considering to ask them to pay a portion of their bill with their allowance or from an after-school job (Parents.com 20113). Introducing small responsibilities are the final puzzle piece for preparing your children to be financially responsible as adults.

Preparing your children with a sound financial foundation and showing them the tools they will need to make informed choices about their future finances is one of the greatest gifts you can give to them. Answer their questions, involve them in some of your financial situations, and lead by example. And remember - it’s never too early to start teaching financial responsibilities!

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Content Sources
1 - Mitra, Mallika (October 2019), Your kid makes $1,500 a year in allowance. Here’s how to turn that into a money lesson, retrieved from CNBC.com
https://www.cnbc.com/2019/10/01/heres-how-to-use-allowance-to-teach-your-kid-financial-responsibility.html
2 - Hamm, Trent (April 2015), 5 Strategies for Raising Financially Smart Children, retrieved from Money.USNews.com
https://money.usnews.com/money/blogs/my-money/2015/04/07/5-strategies-for-raising-financially-smart-children