6 Tips to Help Teach Your Kids About Personal Finance

6 Tips to Help Teach Your Kids About Personal Finance

April 27, 2023

As parents, we all want to do our best to set our children up to succeed on their own. This includes teaching them about financial stability, the value of money, and how to manage their personal finances. Here are 6 tips to prepare your children for financial success, regardless of their age. 

Lead by example.

It is important to be a good role model for your children as they are always watching your actions. Pay attention to your habits, such as how often you use credit cards or make impulsive purchases. Chances are that your children are likely to learn from your behavior and develop similar habits. 

Forget allowance - try commission.

Why not teach your kids the importance of earning money instead of just forking over cash in the form of an allowance every week? You can create a list of household chores such as mowing the lawn, doing laundry, or taking out the trash, and pay them based on the number of tasks they complete. This will help them learn the value of earning money rather than just receiving it as a handout. 

Teach them how to budget.

Paying your children a commission-based allowance that corresponds to the chores they complete is also a fantastic way to introduce them to budgeting. Sit them down and explain that the money they earn from their allowance will be the only money they get. That means that if they want to go to the movies with their friends, buy a new video game, and pick out a dress for the upcoming homecoming dance, they will need to plan accordingly, and budget based on their priorities. 

Save, save, save.

It's important to teach kids that money isn't just for spending, it's for saving too. While it can be difficult to teach young children the concept of saving for the future, starting small is still a step in the right direction. For example, if your young child asks for a toy, sit them down and explain that they can save up for it. As they get older, the prize will likely get bigger and bigger, from a bike, to a spring break trip, to college tuition, and beyond.  

Highlight the importance of giving back.

Teaching your kids about giving is just as important as teaching them about saving. You can start by matching their allowance so that for every dollar they earn, another dollar will be set aside for charity. Once they have accumulated a significant amount, work together to select a charitable organization to donate the money to. 

Teach them the ABCs of finance - credit cards, debt, loans, etc.

Although schools equip our children with skills to face the world, they often fail to provide adequate financial literacy. Despite learning about concepts such as compound interest and how much to tip a waiter, many high school graduates leave without a proper understanding of finance, including debt, credit, and loans. Be sure to explain the difference between a debit card and a credit card. Point out the dangers of taking on too much debt, as well as the difference between good and bad debt. Teach them about loans, including the interest you commit to when you take out a loan. Knowledge is power, so set your kids up to be powerful. 

At Triada Advisors, we understand that teaching personal finance to your children is a gradual process. It's not something that happens overnight, but if you chip away at it little by little, you will set your children up with strong habits that will serve them long into the future. If you'd like to learn more about fostering positive financial habits and leading by example, please contact our team today.