Every parent knows that the examples they set for their children impact their futures. But while parents might work hard to teach proper manners, behavior and study habits in school, they might be doing their children a disservice by not teaching them how to approach money.
How parents prioritize their savings and deal with financial health can impress good and bad money habits on children at an early age. Schools are seeing the importance of teaching financial literacy in the classroom, and just as with other school subjects, how finances are dealt with at home will go just as far, if not further, in teaching children the real-world impact of finances.
While some parents might think that money discussions are too boring (or worse, shouldn’t be discussed with children), keeping an open conversation about money is vital to raising children who understand the value of things that will appear in their future from credit cards to student loans to 401Ks, let alone how to deal with the everyday costs of living.
Here are a few easy tips that can not only help families discuss the role finances play in daily life, but create positive money habits in families.
Make a budget and discuss it
In a world where children’s television is a cavalcade of advertising, there’s a seemingly endless supply of ways that children want to spend money. Since things like mortgages and car loans don’t get the same amount of air time as Barbie Dream Houses, most children don’t recognize the demands on family budgets. By making a budget and letting your children know what goes into a household each month, children will get a better understanding of the idea of wants vs. needs. Being able to set aside an amount of money each month for a special trip or expense will also encourage children to watch what happens as their savings grow toward a goal.
Don’t hide debt
For many families, debt is a way of life. But rather than hide credit cards and other debts, making them an active part of a family’s financial discussions will help children understand how to responsibly use credit. Debt, done for a reason (be it a car, home or college), is a powerful tool, but certainly not a limitless one. If children understand the impact that credit and debt can have at an early age, they will have a better relationship with it as they grow older.
Save for college AND retirement
There’s no question that saving for college is vital. Savings plans, such as 529 accounts, make it easy for families to set aside money for their children’s education. Saving for retirement is also an important habit to show children. By letting them know that a healthy relationship with savings lasts a lifetime, they’ll create their own savings habits early on.
Take two fast-food meals and put it toward finances
Consistency is the key to good finances. Even if a family commits $30 extra a month to either debt or savings, it makes an impact. Being able to show the change that comes with taking the money a family would otherwise spend on two nights out for fast food and putting toward their finances not only teaches children to establish finances as a priority, but does as much for a family’s physical health as their financial well-being.