Ready to Teach Money Skills at Home?

At Freedom Debt Relief, we realize how hard it can be to balance everyday parenting duties with preparing your children for ‌ successful adulthood. For example, as a parent, you want your children to be confident about finances but need to find a way to teach them that doesn't turn them off. 

Fortunately, the best time to teach your kids about personal finances is while they're still living at home. You know your children best. 

When they become bored or frustrated by money topics, you can cut the lesson short and pick it up another time. Even if your child can only be engaged for five minutes at a time, it's best that they learn about money from you. Many of us consider our parents financial role models. And if your parents weren’t good financial role models, you probably wish they had been. 

While they may not always show it, your kids look to you for guidance. They watch and learn, hoping to pick up tips about spending and saving. There are some things you can’t control in life, but you can control the conversations you have with your kids about money. Things may be uncertain in the short term, but valuable money skills taught at home can last a lifetime. Here are six ways to teach financial literacy to your kids.

Learn The Value Of Coins And Bills

If you want to teach youngsters the value of coins and bills, the desire for a new toy can turn into a valuable money lesson. The next time your child asks you to buy them a toy, explain how much it costs. Avoid making them feel bad for asking so they don't learn to associate wanting things with feelings of guilt. Instead, tell them about a special toy you wanted as a child and why it was special to you. Then, play a game. Have them count out the bills and coins it takes to cover the cost of the toy.

If your child is old enough and willing, allow them to work odd jobs around the house to earn enough money to buy the toy. Make it reasonable and simple. Money has a cause-and-effect relationship. Work, get paid. Don’t work, don’t get paid.

Along the way, remember to praise them for their efforts. 

Another teachable moment for preteens is showing how much money it takes to live each month. Sit around your kitchen table and lay out your monthly income in play money (you may have to "borrow" the bills from a board game). As you describe each bill, explain how much you budget for it and have them remove that amount from the "income" on the table. 

The kids will quickly learn that most, if not all, of the money goes to your expenses. This visual can show kids that money is finite and can't be quickly replaced.

Note about kids and finances: According to the healthcare system Children's Minnesota, there's a right and a wrong way to talk to kids about money, especially if finances are tight. Be honest, but don't tell them more than they need to know. Overloading kids with too many details (or your concerns) can scare them. The goal is to teach them without making them feel bad.

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The Power Of Saving

Saving is a crucial skill that, when taught at a young age, can have an incredible impact on your child's financial future. A simple way to teach kids about saving is to open a savings account that earns interest. If they're older, introduce them to the top savings apps to get them interested in putting money away. 

Most banks allow you to open an account online. Use a calculator to show them how much interest they could earn on their money by saving it. Add a dollar-for-dollar match on deposits if you want to sweeten the pot. You could set this up at home using a money jar or piggybank. Every time your child saves a dollar, match it with another dollar. The visual is a great way for them to watch their savings grow.

Spend, Save, and Share

You could expand on the savings exercise by dividing money earned into spend, save, and share money jars, with an investing category for older kids. Have your kids add a bit of money into each category as they earn it.

Here’s how the categories work:

• Spend: Money can be used immediately to spend on what they want. 

• Save: This money is set aside for a bigger-ticket item, like a bike or video game. Estimate how much the item costs and how long it'll take them to save up. Then have them save toward their goal on a weekly basis.

• Share: This money can be used to give to those in need. Perhaps there's a specific charity your family supports. Make it special by having your child select which charitable cause they want to support.

• Invest: Older kids could learn how to invest their money in stocks. You could start with a 529 Plan or open a brokerage account. If your child earns money from someone other than their parents (even for babysitting or mowing lawns), they could open an individual retirement account and start investing for their future. 

Learn The Grocery Budget

One expense kids are familiar with is groceries. If you want to teach them about the price of groceries, start with the products your kids typically ask you to buy. 

Go through your favorite grocery store's weekly ad (or log onto its website) and ask the kids to pick out which snacks they want. Once they've chosen, help them tally up the total. Next, tell them they only have a certain amount to spend on snacks. 

For example, you could limit their snack budget to $20. Are they over or under budget? If they are over budget, ask them what they can eliminate to hit their budget. This is where you can teach them how to adjust their budget to adapt to unpredictable bills, like groceries. 

Involve Kids In The Monthly Budget

Each month, you manage your finances with a household budget. Let your kids take part in the action by discussing the budget as a family. The point is to demystify money and develop a comfort level around discussing it. Money beliefs are developed as a child and carried into adulthood.

Open conversations can lead to teachable moments. Your kids might not realize how much it takes to keep the lights on or how long it takes to save for things. Casually allow them to be part of the discussion so they learn to see budgeting as a routine activity. The atmosphere you create will likely shape how your children feel about money into adulthood. Provide them with the information they need to feel relaxed and confident.

Kick Off A Money Movie Marathon

Financial movies and documentaries could have an impact on your family. There are several movies that can spark healthy financial conversations. Teens may enjoy movies like The Big Short or The Pursuit of Happyness.

If you have young children, let them enjoy The Muppet Christmas Carol, a cautionary tale of the dangers of greed and the joy associated with generosity. Disney's Robin Hood is another good option, addressing the issue of income inequality and introducing the concept of taxes. 

Brush Up On Your Personal Finance Skills

No one is born a financial expert, and we all learn about personal finances one lesson at a time. No matter what's going on in your life, it's possible to hone your money skills. The more healthy financial lessons you learn, the more you can pass onto future generations.