7 Ideas to Teach Kids Basic Money Management Skills

As a parent, you are the first and most important teacher your child will have. Kids develop their money habits from a young age, and if you want to help them succeed in life later on, you need to be intentional about teaching them how to manage their money. That’s why we’ve come up with 7 creative ideas that can help you teach kids basic money management skills. Regardless of your financial situation or resources available to you as a parent, there are ways to effectively teach your child(ren) how to manage money. From simple lessons they’ll understand at their age to more advanced techniques they won’t fully grasp until they’re older, here are some great ways to teach kids about managing money from a young age.

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Talk to your kids about money—and don’t be shy about it.

This may seem like a no-brainer, but it’s important to regularly discuss money with your child. Having open, honest conversations about finances will help your child feel comfortable talking to you about other aspects of their life, too. When you talk to your child about money, try to be as open and honest as you can. Avoid sugarcoating things, and don’t be afraid to talk about numbers. Focus on the present moment, but be sure to include information about your own finances and past experiences as well. If you grew up in a financially unstable household, don’t shy away from sharing that with your kids. When they’re old enough to understand, it’s important they know how hard you’re working to ensure they don’t experience the same challenges you did.

Set small weekly or monthly savings goals.

Kids are usually excited to earn money and want to start spending it right away. If you’re not careful, they will start spending all of it—and not saving any of it. Setting a small savings goal, like $10 a month or $20 a week, will help them build a savings account while they’re young and make it more difficult to spend their money impulsively. If your child has their own bank account, you can add it to their savings goal. If not, you can write it on a piece of paper and put it in your wallet or purse, reminding your child that money is going into their savings account each time they earn a little bit.

Open a savings account for your child and make them an authorized user on one of your accounts.

If your child is old enough to have a job and make a small amount of income, consider opening a savings account for them. If they’re too young to have their own account, make them an authorized user on one of your accounts, where you’ll add a small amount of money each month for them to use. If your child earns income, consider putting a portion of it into their savings account each time they get paid. You can also add a small amount to their savings account each month, either from your own income or by taking a portion of money from another account you’re saving for, like a retirement fund or emergency savings account.

Help them develop a habit of paying with cash, instead of automatically swiping their card or using digital payments.

As your child gets older and starts earning more money, they may want to start using a credit card. Instead of letting them use their own card, suggest that they only use cash or debit. This will help them develop a habit of paying with cash, which is easier to track, instead of automatically swiping their card every time they go out to eat with friends or shop in the store. If you’re concerned they won’t have enough cash on them to cover their purchases, you can always offer to put some money into their wallet so they always have enough. Once your child is old enough to receive their own paycheck, encourage them to pay for their expenses with cash as often as possible. This will help them track their spending more easily and make it harder for them to rack up tons of debt.

Show them how to track the investments they’re most interested in.

As your child gets older, they will likely have an interest in a specific type of investment, like stocks or real estate. Help them track that specific investment and any others you have them tracking by using an online spreadsheet or tracking app like Robinhood, Acorns, or Mint. You can also encourage your child to start reading financial news, like the Wall Street Journal or Forbes, to keep track of trends and learn more about the financial world.

Help your kid understand what APR means and how interest rates work so they can be smart about borrowing money.

Credit cards are a great way to build your credit and start to build a solid financial reputation, but they can also be a way to bury yourself in debt if you’re not careful. Explain to your child the difference between APR and APY, and how interest rates and payments work so they know they can’t take on a loan they can’t pay back. Teaching your children how to manage money is a skill that will last them a lifetime. By being intentional about teaching them how to manage money, you’re helping them avoid debt and save for their future.

Let them make their own mistakes (with a little help from you).

Everyone makes mistakes, and kids are no exception. If your child makes a financial mistake, such as buying something they can’t afford or taking out a loan they can’t pay back, don’t scold them or reprimand them. Instead, let them own up to their mistake and learn from it. If your child takes out a loan they can’t pay back, don’t pay it for them. Let them learn how to deal with the repercussions of their poor decision and figure out a way to pay it back.

Conclusion

Kids learn best by doing, and as a parent, you can use that to your advantage to teach them how to manage money. By being intentional about teaching your kids basic money management skills, you’ll be helping them avoid debt and save for their future. Now that you know some creative ways to teach kids basic money management skills, it’s time to put them into action. These tips will help you create financial literacy in your child from a young age, ensuring that they’re well prepared for their financial future.

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