As a kid, you probably heard your parents say, "Money doesn't grow on trees!" dozens of times. Years later, you know just how right they were — and how important it is to teach your own kids the value of a dollar. As times have changed, so have the ways money impacts our families' lives. While some of the financial lessons taught to children can stand the test of time, like learning how to save and not just spend, others need a little updating to fit the realities of today's economy.
Of course, teaching your kids how to make smart financial decisions is about more than just money. It teaches them responsibility, hard work, decision making, planning, and other lessons that can touch just about any aspect of their life. That's a lot of lessons for kids to learn but starting them out on the right path is easier than you think.
Here are six simple, everyday ways to give your kids realistic money expectations.
1. Let them experience the relationship between work and pay at home.
There's no place like home — and no better place for healthy money habits to start. Paula Pant, a financial expert and real estate investor, advises parents to teach their children about the value of a dollar by making them work for it. One easy, everyday way is to make a chart listing each chore and its "going rate," dependent on your personal household. Or, if you're more into tech than arts and crafts, you can use the ChorePal app from COUNTRY Financial. The app allows parents to create and assign chores to their kids and reward them with points or money toward real financial goals.
In an article for The Balance, Pant acknowledges that this suggestion might be "somewhat controversial" because some families believe their children shouldn't get paid for doing something they believe to be an automatic part of their contribution to the overall household. "If this is your philosophy," she writes, "then you might consider requiring the child to do a baseline level of chores — such as putting their toys away, setting the table, wiping down the table after dinner — as part of their contribution to the household. Anything the child does that goes 'above and beyond' their normal household duties is rewarded with pay." This way, parents can teach their children about working hard for both a personal and financial reward.
2. Use a clear jar instead of a piggy bank.
Many financial experts agree on the importance that children actually "see" money in order to understand its value. Instead of hiding it away in a traditional piggy bank, Dave Ramsey, the founder of debt-consulting company Ramsey Solutions, recommends putting the cash kids earn in a clear jar so they can actively watch their savings grow over time. "Yesterday, they had a dollar bill and five dimes. Today, they have a dollar bill, five dimes and a quarter," he writes on his website. "Talk through this with them and make a big deal about it!" By providing a concrete visual your kids can refer back to whenever they're tempted to spend, they'll get excited about the process of saving.
3. Show them money isn't just about spending and saving.
While teaching children how to spend responsibly and save wisely lays out a necessary foundation for their financial education, it's just the beginning. Kids can begin to learn valuable social lessons by donating portions of their money to a favorite charity and investing other amounts in businesses. You can visualize this for your children with four clear jars each labeled "Spend," "Save," "Donate," and "Invest" or invest your own money in the "Money Savvy Pig," a four-slotted, clear piggy bank.
By giving your children independent control over their money, they will learn the fundamental lesson that to have one item like an ice cream cone bought with their "Spend" money, they may have to give up purchasing another one like a toy from their "Save" money. But they'll also learn their money can benefit others besides themselves through donations and even become part of the larger economy with investments.
4. Don't be afraid to have a little — or a lot — of fun.
Take your kids on The Great Piggy Bank Adventure, a virtual board game from Disney. The free online resource teaches children ages eight to 14 "the basics of setting goals, saving and spending wisely, inflation, asset allocation, and diversification" in a fun, colorful setting perfect for digital natives. The game also allows players to make "tough choices" that affect their financial plans and use different investment strategies to grow their assets — all in a kid-friendly way that makes these lofty concepts easily understandable.
Traditional board games like Monopoly, while not purely intended for educational purposes, can still teach children the hard knocks of earning, spending, and investing money. Even though the game's dollar bills are smaller and more brightly colored than real money, it still helps kids literally feel the give-and-take of personal economics.
5. Be open and honest with your children about your family's financial situation.
As much as you may want to say it, "Because I said so" is not always the best answer to explain to your child why you won't buy them a new toy. Many parents gloss over their financial situation, and the values that inform it, until their children are older. Several financial experts, however, say it's never too early to teach your children about money. One of the most meaningful ways to do so is explaining how you, as their role model, use it every day.
While it might not be as fun as a game of Monopoly, sitting your kids down and charting out how much you make and where that money goes each month — mortgage, bills, food, transportation, etc. — will give them a concrete idea on how to manage their own finances someday. Even if you don't want to divulge exact figures to your kids for fear of them repeating the amount to their peers or in front of company, you can still get the same message across with fun placeholders like candy, fruit, or colorful glass pebbles. If nothing else, giving your child an inside look into your finances might help them understand why you said "no" to purchasing a new toy.
6. Open a bank account for your children.
After your child has saved some money in their clear jar, take them to your local bank or credit union and go through the process of opening a savings account with them. While they'll literally get to watch their money grow by putting it in a clear jar on a regular basis, emptying that jar into a bank account to gain interest will teach them about long-term saving, as well. Eventually, as the money in their savings account increases, they can put it toward their college fund or another large life investment, like a first car. Or, they can choose to keep saving up.
Wherever that money goes when your child grows up, you can rest easy knowing that instead of giving them a trust fund, you trusted them with the care of their own funds. Armed with these tools and resources, teaching your kids how to make fiscally smart decisions is sure to become one of your new favorite family traditions.
Cover photo viaUnsplash.