16 Tips for Encouraging Kids’ Good Financial Habits
Parents should be intentional about teaching their kids good financial habits because, if they don’t, no one else will.
According to Next Gen Personal Finance, a high school personal finance curriculum company, only 16.4% of U.S. high school students are required to take a personal finance course.¹
And Nitro, a student loan educational website, recently reported, “84 percent of respondents agreed that high school didn’t prepare them to handle their money.”²
Based on the data, most kids won’t take a class on good financial habits – except for those their parents are teaching (whether or not they are aware of it).
Beth Kobliner, a finance author who specializes in money lessons for children, says, “Parents are the number one influence on their children’s financial behaviors, so it’s up to us to raise a generation of mindful consumers, investors, savers, and givers.”³
The following list of tips is designed to help you be more intentional about modeling and encouraging good financial habits.
#1 Watch Your Spending
Kids learn from watching their parents’ behaviors. That includes your spending habits.
If kids see a mom who shops ‘til she drops, they learn that money is limitless. If kids see a dad who saves up months for a new video game system, they learn to take their time with big purchases.
If kids have a parent who always says “yes” when they want something at the store, they learn their parents will always pay their way.
#2 Make Kids Work for It
Giving kids an allowance is a fantastic way to teach good financial habits. It is a great tool for teaching them to budget, spend, and save on their own.
However, a true allowance only works if they have been given an opportunity to earn money.
If they are simply given money, they don’t connect the dots between work and a paycheck.
When they are young, pay them for chores around the house. When they are teenagers, encourage them to find work outside of the home.
#3 Let Kids Watch You Shop
The next time you go grocery shopping, take the kids with you. Talk to them about the cost of the items you are purchasing.
Show them the coupon app on your phone and explain how it works. Point out the difference in cost between name-brand foods and generic brands.
#4 Explain Financial Decisions
While parents should use discretion and avoid telling kids more than they are ready to hear, it is generally wise to explain financial decisions to your kids.
For example, you can say something as simple as, “I buy the generic brand of cereal because it saves us money and tastes the same” or “I pack my lunch because it costs less than eating out every day.”
However, as kids get older, they can have more honest discussions about important financial decisions, such as financial decisions they made that they regret (e.g., buying a new car).
Similarly, parents may choose to explain that there are fewer Christmas presents under the tree because they felt that was the wiser financial decision so they could go on a family vacation.
Kids will learn from these honest and open explanations.
#5 Research Costs
Kids need to learn to research costs. When they want something, they want it right then. No waiting.
Retailers know this, which is why they put things kids want right by the cash register.
Instead, teach your kids the value of pausing to research costs. Learning to pause and shop around for the best deal is a good financial habit.
In the future, they will be shopping for cars and homes, and this habit will help them make wise choices.
#6 Show Your Receipts
Kids need to see how things add up.
It’s one thing to point out the cost of one item, but it’s completely different to see how that one item affects the total.
After getting the fast-food order, pass your kids the receipt and point out how quickly the “cheap” food adds up.
Moreover, looking over your receipt for errors is a good financial habit you should practice throughout your life.
#7 Explain Opportunity Cost
Kiddle explains, “Opportunity cost is the value of the next best thing you give up whenever you make a decision.”⁴
Learning to weigh the opportunity cost is a good financial habit that we all should practice.
Learning that one spending “yes” means another spending “no” is a hard concept, but it needs to be taught.
Point out that if your child spends all his birthday money on candy, he won’t have money next weekend to go to the movies with his friends.
#8 Teach Kids to Save Money
Start teaching kids to save money when they are young.
Get them a piggy bank.
Write down a savings goal. Include what they are saving money for and how much money they need. Keep track of how much they are saving.
As they get older, open a savings account.
Encourage kids to always take a percentage of any money they earn or are given, and put it into their savings account.
#9 Provide Opportunities to Give
Giving teaches kids empathy, compassion, and gratitude. It also helps them confront feelings of entitlement.
If your family gives regularly, encourage your children to do the same. When they earn money, have them set aside a percentage to give to charity, as well.
#10 Introduce Kids to Investing
Studies show “66% of people aged 18 to 29 (and 65% of those 30 to 39) say investing in the stock market is scary or intimidating.”⁵
Help your kids avoid stock market intimidation by introducing them to investing when they are younger.
Simply taking time to teach kids about investing takes away some of the fear and encourages them to make a habit of investing.
#11 Talk to Kids about Online Shopping
In-app purchases and in-game purchases get kids into a lot of trouble.
There seems to be a disconnect between purchases like these and purchases in “real” stores.
According to Statista, “an estimated 8.2 percent of parents stated that their children spent more than 100 U.S. dollars on in-app purchases in mobile games each month”⁶ and “over 40 percent of parents stated that their children had made in-app purchases in mobile games without their knowledge.”⁷
Kids need to understand that these purchases work the same way as purchases in an actual store.
Show them that when they make an app purchase, it charges your credit card, which then has to be paid back.
Remind them that even seemingly small purchases add up.
#12 Have Them Watch You Pay Bills
The next time you sit down to pay your bills, have your child sit with you.
Think for a minute about the impact of showing your 10-year-old how to pay a trash bill. Most kids probably have no idea you have to pay a company to collect trash.
Kids need to understand that we pay for basic utilities, and we need to show them how we pay for these things.
Seeing their parents practice good financial habits, such as paying their bills on time, may be boring, but it is worthwhile.
#13 Get Them a Kid-Friendly Debit Card
There are several different debit cards available today that are designed for kids, such as the Greenlight debit card.
The Greenlight debit card is connected to the parents’ bank account. Parents can set up allowance funds to be transferred to their child’s debit card.
The debit card automatically deposits the funds into savings, giving, and spending according to the percentage parents set.
Kids use an app to see how much money they have in their account (and on their debit card), and parents receive notifications for the cost and place of purchases.
#14 Avoid Impulse Buys
Learn to say no to impulse buys. And don’t give in to your kid’s impulse shopping requests. Practice self-control yourself and explain why self-control is a good financial habit.
#15 Help Kids Find Contentment and Avoid Comparisons
Don’t try to keep up with the Joneses. If you live your life this way, you’re instilling the same habits in your kids.
Instead, help your kids find contentment with what they already have instead of constantly being on a quest for “more, more, more.”
When kids start making comparisons based on social media, rein it in.
Point out that we don’t really know what other people’s bank accounts look like or what financial decisions they have made to get there.
#16 Praise Good Financial Habits
Last but not least, go out of your way to praise your children when they demonstrate good financial habits. Brag on your children for earning their own money or saving up for that big purchase.
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