The Money Talk: Help Kids Become Smart Spenders

If you teach your kids how to manage money from a young age, you can help them avoid developing some of the bad habits that adults spend decades trying to break. Moreover, you'll prepare them to expertly navigate a world of confusing and misleading information. In this article, you'll get 4 great ways to help kids build smart money habits.

Encourage Them to Have Savings Goals

Next time your child comes to you begging for a new toy or game, instead of saying no, say, "Sure, save up the money for it and you can buy it for yourself!" To make this effective, they need to have a clear "earnings schedule" for chores so that they know exactly what they need to do to save the amount they need. Consider opening a savings account in your child's name where they'll see the balance grow as they work toward their goal.

Let them Take Charge of Back to School Shopping

Back-to-school shopping is a great opportunity for kids to practice making financial decisions and directly experience the rewards of their decisions. Here's how to turn shopping into money management training:

  • Have your child write a list of back-to-school essentials. Make sure they reference any list provided by the school.
  • When you get to the store, or online, give them their budget (i.e. the amount you planned to spend anyway) and let them shop.
  • Stay with them but don't provide any input unless they ask.
  • Keep a running tally of the total cost to help them keep track of how much is left in their budget.
  • If they run over budget, talk through the process of deciding what to put back, what you can find a cheaper version of, and what they might skip altogether.

If your child needs incentivization to stick to the budget, tell them that if they can get everything under budget, anything leftover can be used to go for ice cream or a treat of their choice.

Talk About Money in Front of Your Kids

You and your partner might feel like these "adult" matters should be discussed after the kids are in bed but it's actually a great way for kids to passively absorb some financial sense. If it's not something you normally discuss often, try to "think out loud" about your budget. As they get older, these talks can involve them more directly and you can encourage them to ask questions.

Give Them a Charity Budget

An important part of becoming a responsible consumer is learning how to part with what you no longer need so that you can avoid clutter and make a positive difference in your community. There are a few ways you can include charity into your child's routine:

  • Before that back-to-school shopping trip, have your kids go through their things and make a "donation box" of clothes, school supplies, and things they don't want or don't fit into anymore.
  • Start a family tradition of periodically clearing out old toys and other things that you no longer want. You can do this before any holiday where the children usually get gifts.
  • Allow them to choose a cause or charity they like and agree to make a monthly or annual donation in your child's name.
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