I have a vision. A vision that raising financially confident kids will be an easy-to-do, everyday family routine. Not just the savings and investing portion but also how to manage and make smarter decisions around money in our day-to-day lives.
My dream is that one day, these important money lessons may even be included as a required class in High Schools and Elementary Schools. But we don’t need to wait for that to happen to begin growing financially confident kids. We can start today by teaching our own kids.
I know that in order to make that happen, I need to help as many parents get their household finances in order first. Let’s do this. Not just for our own future but for our kids and their kid’s kids.
Here are 6 things I believe financially confident kids should know. Plus a few tips for how you can begin teaching these lessons to your kids:
What’s a Budget?
Make sure your kids know exactly what a budget is.
Here is a super kid friendly definition for budgeting. Keeping track of all the money you got and how much of it was used to pay for different things so you know what you have left over.
Including your kids in your family budget planning is a great way to teach them what it takes to run a household at an early age and it’s a lesson they won’t ever forget.
We recommend including your kids in budget decisions starting at a young age, and inviting them to your family money meetings as soon as they are old enough to grasp what is going on.
Since our kids were 4 and 6 years old, we’ve had them use piggy banks to start teaching them the concept of earning and saving their money to pay for things. Now that they are 10 and 12, we’ve been working on introducing the concept of budgeting to them. Kids that grow up in a home where money is discussed openly and honestly, become more conscious and responsible with their own spending and expenses.
How to be Smart with Credit Cards
It’s so easy to accrue extensive credit card debt if you don’t fully understand how they work. I’m guilty myself. At one point, I had over 100K built up. But it’s important to teach kids that when they choose to buy now, pay later – they’re really paying more later due to interest.
Here is a kid friendly definition of credit. When you buy things at the store now and pay for it later.
And a kid friendly definition of interest. Extra money you have to pay when you don’t pay the bills on time.
Credit cards aren’t all bad, you can use them smartly – but children need to be taught how to.
Needs vs. Wants
Teaching our kids the difference between a want and a need can be so difficult. While it is tricky to explain to littles and sometimes confusing for them to work out in their minds, it is so important.
Here is a kid friendly definition of need. Things to help you live and grow safely, like clothes, shoes, food, shelter, electricity
And a kid friendly definition of want. Things that helps make life more easy and fun like toys, iPads, and vacations.
Bills, don’t we all wish we lived a life without them! But that’s not the case, there will always be bills. Financially confident kids need to learn what bills are, how they work, and how they pay them.
Here’s a kid friendly definition of bills. The money you have to pay or owe for different things you use in the house or buy at the store.
Make sure that kids know bills come in lots of different shapes and sizes. The may each have different payment schedules (some bills might be monthly, some quarterly, and some yearly), and they may need to be paid differently (mailed in, in person, or paid electronically – some are even taken directly out of paychecks or accounts).
When talking about bills, you’ll likely also stumble into a conversation about late fees. This is what happens when bills aren’t paid on time. It’s also how debt can really start to pile on quickly.
You could explain late fees to your kids by using an example of not cleaning their room each week. If they miss one week, there’s even more to clean up the next week – plus a consequence for not cleaning up in the first place.
Here is a kid friendly definition of late fees. A charge you pay when they fail to make a payment on time.
Living Below Your Means
Another important lesson that will help to make your kids financially confident is teaching them to live below their means. It’s best to teach this lesson by example by showing your kids how you budget, where your money goes, and how much you have left after paying bills and spending. You can even take it a step further by establishing a chore and money system in your home and put your child in charge of his/her own finances.
Are you looking for support in getting your finances in order so you can set a better example for your kids and get them off on the right track? I’d love to help you out! Grab our FREE Family Chore and Money System Guideand get your family started today!
One thing I know for sure – and you’ll hear me say over and over again is this: It’s never too early to start talking to your kids about money! I try to find spontaneous moments in my daily life where I can share with my kids about money. But, I try to teach them about money in a more structured way, too.
One way my husband and I do this is by holding Family Money Meetings. These meetings are designed for us to discuss and explain to our kids the process of earning money, spending money, and saving money.
What is a Family Money Meeting and why should we have one?
We had our very first family money meeting when we first introduced our kids to our chore and money system. The meeting was to discuss the new process and to make sure everyone was on the same page. We also wanted to get them excited about it.
We encouraged them to propose their own ideas or input into the new process and you can do the same with your kids. The more involved they are, the more likely they are to stick to the plan. If their ideas make sense and you can accommodate it, add it.
We now incorporate these Family Money Meetings into our schedule every few months to check in on the process and make sure everything is still working for everyone. We will also call a meeting sooner if there is an issue that needs to be addressed or a system that needs to be changed.
Here are 5 things we discuss at our Family Money Meeting
The first thing we need to discuss with our kids in a Family Money Meeting are the rules! The kids need to know what is expected of them. This should be very clear, down to the days things will be done and to what standard they will be completed. The more clear you can be about expectations, the more likely your kids will be successful.
Next, you need to discuss consequences. Discuss ramifications for things not being done, i.e. lose money and screen time. Be clear to explain that in the real world, people get fired if they don’t do their jobs.
For this topic, you want to let them know exactly what day each week they will be paid. Also, discuss what will happen each payday (see below).
After you talk to your kids about their pay day, you want to make sure they have a clear plan for what they will do with that money once they are paid. We suggest setting your kids up with three money banks: one for savings, one for spending, and one for sharing. You want to explain the three types of money banks they will have and talk about how they are different.
Once they receive their pay, they will be expected to divide up their pay into the 3 money bins. I leave it up to them to decide where their money goes but the only thing I do reinforce is that something has to go into each bin. You could make it so that it’s a standard % like 40/40/20 or any variation–really it’s up to you. Keep in mind that you will want to pay them in denominations that would be easy for them to divide, whether it’s quarters or bills.
Next, you’ll want to talk to your kids about keeping track of how much money they have in each bank. Explain to them that each time they add in or take out money, they will need to track it. This is so they will always know how much money they really have. Then they can properly decide whether they can afford that new toy or not.
In the beginning and depending on their age, you will be more involved with helping them figure this out or be supervising. This is to make sure they understand what to do.
Did you know it’s super easy to teach your kids about different money lessons?
Most people grow up not learning money lessons from their parents. They have to go through life and learn it the hard way, like I did. I learned from my parents to just – work, work, work, save and not spend. That can be a money lesson but I’m here to encourage you to teach your kids to manage their money more effectively.
There are so many easy opportunities in everyday life where we can teach our kids about money. These teachable moments are scattered all throughout your days and I want to share a few of them with you so the next time you do it, you’ll recognize it and say to yourself, “Oh, this is a teachable moment!”
Finance is a huge part of our lives. If kids don’t learn about it early on, it will create huge issues for them in adult life.
Why even talk to our kids about money when they are young?
You might be thinking – why bother, they’re so little? They’re just kids. Starting at 5 or 6, it’s okay to start. And you’re likely already doing it in small ways. As they get older, we want them to develop better habits and have a healthy relationship with money.
If we don’t share with them about money, they will grow up thinking money grows on trees. Or, they’ll go away to college and keep calling asking for money. We don’t want that. We want them to be self-sufficient. We want them to go to college and be able to manage their money on their own – plus understand and value money and have a healthy relationship with it.
When they learn these lessons early on, they will grow up and appreciate money but also – money won’t control their lives. They will control their money – instead of the other way around.
I want to teach my kids skills so they can value and understand money. Now, you might be thinking, “I’m not good with money, how can I teach my kids about money”. Well, you can use these tips to start implementing positive money habits in your own life, too.
Here are 3 easy ways to talk to your kids about money lessons in your day-to-day life:
Have Your Kids Track Your Eating Out Budget
You might not have any idea how much you spend to eat out each month. That’s okay, you can start now with the help of your kids!
We set a dedicated amount each month for this. For us, it’s usually around $400. If we had some left over from the previous month we roll it over into the next month. I have my kids track this budget using a calendar board in our living room. Each time we eat out, I have them write down where we ate and how much it cost. Then they subtract it from the budget.
My kids are a bit older, 10 and 12, so they can do the math themselves. If you have younger kids, you can work through the math together with them and explain to them what you’re doing and keep yourself accountable as well as start to expose them to what you’re doing.
The goal is that by mid-month, you’re only about halfway through your budget. So, when my kids come to me and ask if we can go out and get some Boba drink, I ask them to look at the board and see how much we have left in our budget.
Here’s the teachable moment – I tell them, if we spend it all now, that means we have 2 weeks with no money to spend on treats and eating out. So I try to teach them to spread it out evenly. Go at a balanced pace, don’t spend it all up front. If we are out of money and they ask to go out for food – we say there’s no more money for that. My kids are okay with that now because they understand. It helps to keep all of use accountable for not overspending on eating out.
Talk to Your Kids and Get Them Involved in Tracking Common Bills
We use the same board in our living room to track our common household bills like water, electric, and cable/internet – stuff that the kids use regularly.
Every month, I write down how much we spent that month on those bills. If the water bill happens to be a little higher one month, I’ll point it out to the kids and get them thinking about why that is. I’ll recommend to them to be more mindful of how we’re using our water and electricity in our day-to-day life. I also point out if the bills are going down and I say, “Wow you’re doing really good, guys!”
You’re already paying bills each month, so I recommend just pointing out what you’re doing to the kids so they’re aware, too.
Teach Your kids the Difference Between Needs and Wants
When you’re at the store or talking with your spouse about getting something new, you’re already running through it in your head. Just talk it out with your kids. Talk about if it’s something you truly need or something you just want. Ask, “Do we really need it?” Let your kids hear you talking about it and expose them to the conversation. Get them used to the habit of taking a step back before making an impulse buy.
Our kids have gotten used to this. When we go to the store, they know that we won’t make impulse buys.
There are teachable moments all day, every day with our kids. When you are already doing something, talk to your kids and involve them in it. The worst thing you can do for your kids is to keep them out of the loop when it comes to money lessons. Not teaching your kids about money management could lead to kids accumulating tons of debt and I know I don’t want that for my kids. If there is something I can do to help prevent my kids from getting sucked into the trap of money issues, I want to do that.
I recently heard an interesting story from a business peer whose daughter started college in the fall. This mom was telling me that she received a call from her daughter thanking her for teaching her how to cook, clean and do her own laundry. She was pleasantly surprised that her daughter had thanked her for teaching these skills and she asked her daughter what had prompted the call. Her daughter relayed to her that she had been horrified when she discovered that her roommate didn’t know how to do any of those things.
If your kids were to go away to college today, what kind of phone call do you think you’d receive?
What skill sets do you want them to leave home with that will give you the peace of mind of knowing they can take care of themselves? With the right preparation, we can get our kids on the right track, so that they can each acquire these important life skills.
You may be thinking, what ‘life skills’ should I be teaching my kids?
We’ve put together a four part series that will highlight different types of life skills all of our kids desperately need to learn before heading off into the world. Ultimately, as a parent, you get to choose which life skills are important to you and your family, but this series will give you a thorough overview of the areas I focus my time on with my kids.
First Up in our Life Skills Series – Let’s Chat Personal Finance Management.
Personal finance is one of the most essential life skills, that we don’t tend to teach the next generation. I guess we just assume they will just figure it out like we did.
However, I think many of us (I’m raising my hand right now, too) took a bit longer to figure it out than necessary. I don’t know about you, but if I can help my kids now to avoid the mistakes I made later on down the line – I’m all for it.
Because of that, I’ve already started on many of these lessons with my own kids.
HOW TO BUDGET
The ability to budget and be financially responsible is absolutely vital to your life skillset. It’s a skill we can learn from a very young age and one we should build upon throughout our lives. Setting financial goals, taking care of your money and calculating expenses are an important part of budgeting.
HOW TO AVOID/GET OUT OF DEBT
Learning to live within your means is definitely a learned skill. Learning to slay your debt is about keeping your spending in check and managing a plan to pay off your debt quickly and efficiently. We refer to it as a war, slaying, tackling and fighting because it’s truly challenging. But, the amazing thing is, with a little practice, avoiding debt is a war that we can teach our kids to win.
HOW TO MAKE A MAJOR PURCHASE
Maybe your kids are about to buy their first car—or maybe just their first new jacket with their allowance money. Whatever it is, they should understand how to compare prices, how to do research via Consumer Reports, and how to make a smart, well informed, purchase.
BALANCING YOUR BANK ACCOUNT
How many of us just use our debit card without writing things down? How many of us pay bills online or have them set up to automatically be debited from our accounts and then sort of forget until they show up on our bank statement?
Being able to record your expenses is a skill that keeps us in touch with your finances. It’s important that our children understand what it truly means to use their debit cards and actually physically subtract the money from their bank accounts. It keeps them immediately accountable for what they’re spending. Have them try committing to write things down for a month and see if you notice a difference in their spending patterns.
HOW TO USE COUPONS
Learning how to use coupons can actually be fun for kids! My children love it and it’s really easy to get started. With a little organization and some practice, you’ll become a couponing queen (and you’ll rarely catch yourself or your kids paying full price for ANYTHING).
Once they have saved a lot of money or have their debt paid off, understanding how to invest their money wisely is also a huge learning experience. Even people who have money to spare have trouble with investments and making that money grow.
Really, there are very few ways to “get rich quick” aside from winning the lottery, and most investing and money management attempts have to be carefully vetted and researched. Show your kids how to research various areas of investment such as the stock market, real estate, or startups before they decide to let go of their hard-earned money.
Bargaining, bartering, negotiating—it’s a learned life skill many of us shy away from. Learning how to trade, make an offer, and be comfortable with asking for a better deal can save you money. It can also be a valuable skill when you’re faced with a tricky money situation (like asking for a raise) where negotiating is essential and expected.
Teach your kids not to shy away from making a bargain. Challenge them to practice until they feel comfortable. That might mean saying, “Is that the best you can offer?” over their next big purchase or you could have them set up a swap with a friend to practice negotiating. This will help them learn to stop cringing whenever a negotiating opportunity presents itself.
Our kids need life skills now more than ever. Period. End of story. As their parents, it is our job to teach them. But, when we don’t know where to start – it can be overwhelming. My advice, start with personal finance management. Come back next week for part two where we’ll be chatting about cooking and cleaning.
In the meantime, you can grab our completely FREE Family Chore and Money System Action Guide, here. You can also hop over to Facebook and watch me walk through how to use it, here. If you’d like even more support, let’s chat about 1:1 coaching and I’ll help you set up a systems and routines that will work for your unique family.⠀
The day you realize your child or children have no concept of the value of money can be both jarring and eye opening. We all want to raise confident, empowered, educated, well prepared kids. But often times, our desire to give our kids the absolute best can lead to entitlement issues.
In reality, the best gift we can give our kids is an education in life. One of the most important life skills for any kid to learn is the value of money. It’s not always an easy concept, especially for young kids or kids who’ve already established a pattern of being given everything they ask for. But, it’s also never too late to start and reverse old patterns that didn’t serve your family well.
You might be wondering if it’s time to start talking to your kids about the value of money. If you’re wondering about it, I’m guessing you’re already beginning to see the signs below and that’s why it’s begun to weigh on you.
Here are 4 signs your kids need to learn the value of money
They say “I need” when it’s really a want.
Teaching our kids the difference between a want and a need can be so difficult. While it is tricky to explain to littles and sometimes confusing for them to work out in their minds, it is so important. If they think they “need” things that are very clearly wants, this is a major red flag.
They tell you to just put it on your credit card.
The first time I told my child we weren’t getting something because I didn’t have cash on me and he responded with, “That’s okay mom, just put it on your credit card”, I actually froze in my spot.
Kids see, hear, and absorb more than you might expect. Which means, they’re likely seeing and hearing ads for credit cards all over the place.
If you don’t show them your cards or talk to them about credit, from what they see on TV, they may think credit cards are a magical flow of endless money in every adult’s pocket. If they can verbalize this – it’s time to talk to them about how credit really works.
They expect to get something whenever you’re out shopping.
I feel like this was one of my biggest mom fails for a long time. Every time we were out shopping ANYWHERE I would allow my kids to pick something. To me, it was worth the money to have them cooperate on the shopping trip.
Boy was I wrong about what this habit was actually teaching my kids. The headaches it gave me down the road were far worse than simply having said “No” on the spot. Which leads us nicely to…
They throw a tantrum when you say “No” to a purchase in a store.
Every parent HATES being the one who’s kid is melting down in the store. So, many of us do whatever we can to avoid it. Like, letting them have whatever they want just to simply avoid the public embarrassment and shame that will come along with their tantrum.
In reality, if they react this way to your saying no, it’s a definite sign that they need to learn about what can and can’t be bought and why. They need to learn how money works and when and where it should be spent.
It’s never too early to start talking about money
Bottom line, it’s never too early to start talking to your kids about money and showing them the real value of money. The more kids see and are involved in your conversations about finances and budgeting, the better prepared they’ll be to handle their own finances as young adults.
If you grew up with no concept of the value of money, you don’t have to repeat the pattern with your own children.
Now that you know your child NEEDS to learn about money, what do you do?
First, you’ll need to know if they are cognitively ready to learn about money. Can they count? This is important. For more information on determining if they are cognitively ready to talk about money, check out this post.
If you decide that they can handle the topic, next you need a plan. This is where we can help you! We’ve devised an action plan for establishing a chore system and budget WITH our kids. To completely understand the value of money, it’s so important that your kids be involved in the family budgeting process.