Wondering how to teach your kids about money? Teaching your kids good financial habits is important so that they set a healthy foundation and get a kickstart for their future. Start your children on the right foot by talking to them about topics like investing, credit history, or saving, and they’ll be much more successful with good habits for a lifetime. Here are six great ways to teach kids about money.
Open your child a bank account
Open your child a bank account so that they can deposit money and start saving for larger purchases. Every time they get an allowance or gift money, get them into the habit of going with you to the bank and depositing it. Collecting money as a child will be like collecting trading cards or stuffed animals--they’ll get excited about it and want to grow it.
Show them the magic of compound interest
Do you remember when you started investing and wish you learned about it years ago? Teach your kids about compound interest as soon as you can so that they’ll understand the concept of exponential growth with their money. Show them a graph of how it works and teach them that investing early will pay off in the future. Learning this and understanding the difference between saving and investing will build them a strong financial foundation for future success.
Open your child a brokerage account
On the note of learning about compound interest, open your child a brokerage account. With so many platforms offering commission-free trading and no minimum balances, it’s the perfect time to open one for your child. Their account can have something simple, such as one or two shares of a particular company. Make sure to be actively managing their account with them but show them how they can grow their money by investing. By teaching them about investing early, it’ll get their interests piqued. They’ll want to invest more rather than spend.
Add them as an authorized user on your credit card
Once your kid is old enough, add them as an authorized user on your credit card. Even though you’ll be paying the bills, you can use this to teach them about good spending habits and paying bills on time. You can also teach them what a credit score is and how it’s important for their future. Just as school grades follow them throughout their childhood, explain how their credit score will follow them throughout their lives and what it does.
Teach your child the detrimental effects of debt
The magic of compound interest can grow your money in investments, but it can also snowball your debt into amounts that you can’t manage. Teach your children about this concept early on to ensure that they are responsible with their spending. You can also use this moment to explain the concept of an interest rate and how it’s so important to pay your bills on time, such as your credit card.
Teach your child how to give
When I was young, I was taught the importance of earning money so that I could support myself and have the ability to give to the less fortunate when I’m older. Learning to be selfless is probably single-handedly the most important money habit your child can learn. While the above six ways will teach your teenager how to save and grow their money, teaching your child how to give when they are able is equally as important. Some ways to do this are giving your child a dollar to give to the homeless or going to the food bank to donate with them. Although money is important, money doesn’t equal happiness and your kids should learn that early on.
Thinking of how to teach kids about money can be daunting but starting with these couple tasks will kickstart their understanding of money in the real world. Your kids will thank you in the future!
Chloe is a software engineer who has a passion for personal finance. She blogs about credit cards, investing, and side gigs at Off Hour Hustle. When she’s not coding or writing, you can find her climbing, hiking, and skating.
