Guest Post: 5 Simple Steps to Raising Money Savvy Kids

During the school year, it's only natural for parents to think about what their kids will be learning. Their schedules will be full of necessary math, science, English lessons, and more. These skills will benefit them now and down the line. The lessons passed on at home are even more important than what they learn at school. One area where parents can give their children a leg up is finances. Before they leave home, there are opportunities to talk with them and show them how to manage their money wisely. However, it can be tough to know where to start.

If you're ready to pass on valuable financial lessons to your kids, here are five essential principles to keep in mind.

1. Introduce Money at Their Level

Whether your kids are high school schoolers or preschoolers, there are money lessons you can pass on. However, to make it stick, you need to engage them at their level and align it with their interests. Believe it or not, even the little ones can understand key financial concepts like making a budget and saving for special toys.

When we first started talking with our girls about money, we used snacks as our example. Whenever we went to the grocery store, I had them choose the snacks for the week, but the catch was they had to stay within the budget. It gave them practice in comparing their options, essential addition, and how to shop deals. Nothing complicated, but those lessons laid the foundation for other conversations like managing their allowances. If you're looking for more ideas on how to start these conversations, Sesame Street has some adorable and fun videos to watch with your preschooler.

With high schoolers, you can begin by sitting down and discussing what some of their goals are. For example, do they want to buy a car, save up some money for college or training for a trade, or have fun money for an upcoming trip? Work with them on coming up with a plan to hit their goals. For example, could they do extra chores around the hour, or are they ready for a part-time job to earn extra cash? Perhaps they have a skill or interest that they can use to build some income, like tutoring, dog walking, or tech repair. 

You can help them open a checking account for regular spending and begin stashing away for their long-term goals. Tying finances to what they enjoy can make the conversations more memorable and encourage them to follow through.

2. Use Allowances Strategically

Allowances can be a tricky topic for parents. Every family approaches it differently because they have different needs and goals. There are also crucial decisions, like figuring out how much to give as an allowance. You want to pay enough so they can get real-world practice saving, giving, and spending, but not so much that they don't have the initiative to take on work to earn it faster.

Researching online with parenting sites and reading insightful books like The Opposite of Spoiled, it looks like the average amount for weekly allowances is around 50 cents to a dollar per year of your kid's age. That means a ten-year-old would get $5-10/week while a six-year-old is looking at $3-$6/week. Parents can then decide if they want to add bonus chores for extra pay.

Speaking of chores, another debate parents have is whether or not to tie them to allowances. For us, we do a bit of both. We have some chores that are part of their regular schedule that aren't tied to their allowance. If they want to earn more, we have seasonal work and projects they can take on. We feel it's a good balance between learning to contribute to the family and seeing the value of work.

3. Include Them in The Family Budget Chats

While finances may not seem like a fun topic to talk about, it can be the beginning of meaningful conversations. When you're talking about why you're investing for retirement or saving up for a family vacation, discuss with them why those goals are priorities. Let them also see how you're planning and budgeting so they can get an idea of expenses to expect and help them start defining what their priorities and goals are for the future.

4. Give Them Opportunities to Be in Charge

Speaking of including the kids, another wonderful way to build up their confidence and skills is by letting them take responsibility for expenses or handle the budget in a manageable situation.

Years ago, when we took a trip to the zoo, I let my older daughter be in charge of food and drinks for our visit and gave her the cash so she could budget. Even though she was in elementary school, she did a pretty good job managing it. After looking at the prices, she upgraded the meals while sharing drinks with her sister. It wasn't a massive budget, but she was excited to 'act like a grown-up.' It's a positive memory that will hopefully show her that she can manage money well.

5. Let Them Make Mistakes

This last one may be the hardest for parents. Of course, we tend to want to protect our kids, but you can better prepare them to make sound financial decisions by letting them make mistakes.

For example, kids may want to spend money on frivolous things. We had this happen with our oldest. She's a big fan of a video game-centered YouTube channel and wanted to buy a merch box from them. Even though I thought it was a waste of money, she budgeted and saved for it, so we ordered it and had her pay. However, after getting it, she did notice that compared to what she paid, she didn't get much out of it. So she was out of money, but that experience made her consider her purchases more carefully.

Or how about if you had a teenager who wants to go to a concert, but they haven't saved up enough to cover tickets and concessions? Depending on the circumstances, allowing them to miss out on one show may encourage them to consider being more mindful about their budget. These disappointments and realizations may sting, but down the line, they could steer them away from substantial financial mistakes like taking on unnecessary debt or relying on others to bail them out.

Hopefully, these tips help you become more comfortable discussing finances as a family. By making it part of your routine, you're keeping money in its place: as a tool to help you and your kids reach your goals!