Teaching our kids to feel comfortable with money is one of our many responsibilities as parents. Sure, it can be hard when we're still struggling to fully master our own finances. But imparting financial health early can help set our kids on a path to success that has ramifications far beyond their bank accounts. Feeling good about money can also give them a larger sense of confidence that translates into happiness and well-being down the road.
With that in mind, here are seven important money skills that I recommend parents teach kids, starting at around age 3 or 4 through the preteen years:
1. The knowledge that they can’t have everything
One cornerstone of smart financial choices is giving up some things, like an expensive new outfit, so we can save for more important things, like a family vacation. Even a toddler can begin to grasp this when we explain why we can’t buy everything he wants at the toy store. (Of course, it’s easiest to have this conversation when he’s otherwise calm and happy and not upset because you’re not buying him a new Transformer toy.)
2. How to save money together
Saving is always more fun when it becomes a family project. My own kids, who are ages 3 and 6, love making pizza on Friday nights. We save about $1,200 a year by making it ourselves instead of ordering it in, and the results are much healthier, too.
3. An awareness of big family goals, including saving for college
Kids might not yet appreciate the high cost of college, but if you’ve opened up a 529 account or some other form of college savings, it can be helpful to explain that to them. That way, they can begin to grasp the concept of saving for something that is still far away, and as it gets closer, they will begin to appreciate your efforts too.
4. How to use their skills to earn money one day
Young kids can get experience setting up the classic lemonade stand, and as they get older, they could even expand their entrepreneurship (with your oversight). If they’re crafty, help them set up an Etsy shop or display their paintings online or at a local art fair.
At this stage, the goal is less about making money than about feeling comfortable trying.
5. The knowledge that they are fully capable of making smart money decisions
Sadly, gender differences when it comes to money start at such a young age. A recent T. Rowe Price survey found that even between the ages of 8 and 14, boys are already saying that their parents talk to them more about money than girls do. So let’s make sure we’re chatting with our daughters as much as our sons about smart saving, spending, and earning too.
6. The understanding that managing the family finances takes time
If kids never see you paying bills or managing accounts, then they might get the false impression that those things happen automatically. Instead, let them sit next to you when you pay the next water bill or when you log in to your bank account online.
They'll start to see it as a regular activity, like working out, and one that they should set aside time for.
7. Appreciation for what they have, and how to share it with others
The feeling of abundance often starts with gratitude for what we have. Simply taking a few minutes before meals or on other family occasions to express thanks for what we have can help foster that feeling instead of always wanting more. Starting a family tradition of jointly giving to a cause on a birthday or holiday can also help reinforce that feeling.
Ultimately, teaching kids to be financially healthy comes down to the behavior we are modeling for them as much as what we tell them. That means one of the most important things we can do to teach our kids smart money habits is to practice them ourselves. That includes setting long-term savings goals, monitoring our spending so we can put money toward those goals, and investing for our (and our kids’) future.
Financial security, after all, is what can give us the freedom to spend our lives the way we want—which often means spending more meaningful time with our families.