Financial education isn’t a formal requirement in schools, but financial literacy is a critical skill to develop for success in the real world. Most individuals either don’t learn about personal finance – and therefore lack good money management skills – or they learn what they know from trusted adults around them.
If you have children or are close with kids in your family, get them on the right path to financial success by incorporating lessons about money into everyday situations.
It’s okay if you don’t know everything yourself, of if you’re still learning. You don’t need all the answers.
What’s important is starting a conversation about personal finance and money with the kids you know, and providing them with the tools they need to continue learning as they grow up and it becomes more and more important for them to understand how to use money to take care of their needs and meet financial goals.
Here are some good money lessons to teach kids if you have the opportunity:
Money Lesson 1: Saving for What You Want
Delayed gratification is a concept that’s hard to grasp even for adults, but luckily it’s a lesson that kids can learn at a young age. In fact, studies have shown that toddlers who learn delayed gratification do better in school.
Teach kids that if they really want something, they should save up and buy it for themselves.
In Action: Does your niece really want that $19.99 doll from her favorite movie? If she receives an allowance from parents or money from other relatives, help her learn to save up that money for her doll.
Find a picture of the doll in the ads or online, then place it next to her piggy bank. Help her count out her money, and ask her how far away she is from her goal.
Instead of spending her allowance as she earns it on cheaper items like pencils or bracelets, talk to her about adding her money together to get to $20 – and to her goal of purchasing that bigger, more expensive doll.
Money Lesson 2: Budgeting for Wants and Needs
Setting up a budget isn’t difficult, but learning how to stay within it on a month-by-month basis can be. Help the teenagers in your life prioritize spending now, while they still have the financial support of mom and dad to cover necessities.
In Action: Do you have a 14- or 15-year-old nephew who is impatiently waiting to get his license? If he works a part-time job or receives an allowance, help him set up a budget to buy (or contribute to the cost of) that car he really wants.
First, look up cars he wants online, then help him set up a budget and timeline to afford that car. It’s likely that his dream car may be a little pricey, so you may have to look up a few (used) cars and build several budgets.
By setting up a budget and timeline, this will show him how and when he can afford the car he wants. It will also reinforce Lesson 1, as he’ll have to stick to that monthly savings budget if he wants to reach his long-term goal.
Money Lesson 3: Smart Credit Card Usage
Don’t let the kids in your life fall into the trap of high interest rate credit cards and debt. If you have junk mail credit card offers lying around, use it as a learning tool before trashing it.
In Action: Using credit cards for immediate gratification can be a difficult temptation to avoid, so show your kids or younger family members how a $400 television put on a credit card can morph into a $700 regret if you don’t have the cash to actually pay the balance at the end of the month.
You can discuss the math behind interest rates with older kids, and talk about how budgeting can help pay for monthly expenses without having to use a credit card to fulfill fleeting “wants.”
With younger kids, lead by example – because they are watching, and they imitate what the adults around them do. Use cash when making purchases with young kids in tow, so they can observe that you have to exchange something tangible to receive what you want or need.
Money Lesson 4: Encourage Entrepreneurial Thinking
Some people are born with the natural traits and abilities to be professionally successful entrepreneurs as adults. Most people are taught how to think like an entrepreneur for financial and professional success.
While kids don’t have to grow up to be entrepreneurs in order to have fulfilling, great lives, learning an entrepreneurial mindset can help no matter what career path they choose.
“Think like an entrepreneur” means understanding how to problem-solve, come up with innovative and creative solutions, learn from mistakes and use failures as learning experiences, and ask questions.
Kids who practice entrepreneurial thinking are curious, empowered, and excited about new opportunities to learn and test skills. These are wonderful attributes to carry into adulthood, where that can translate into an ability to earn money on their own, create a satisfying career, and understand the importance in investing in their own knowledge and skills.
In Action: Encourage entrepreneurship in the kids in your life by helping them develop skills at an early age. If your nephew is into coding, encourage him to build his own websites. If your niece really likes to write, encourage her to sign up for writing classes, join writing workshops, and read prolifically.
And again, lead by example. Show them that entrepreneurial thinking can allow them to create a side hustle or side business – or a full-time business by putting your own skills to work in whatever capacity makes sense for your situation. Then invite your kids or young family members to see how you do it.
Engage their curiosity and show them where hard work can lead.
The bottom line in teaching money lessons to kids? Be open to the conversation. Start a discussion. Encourage them to ask questions and provide answers where you can.
And if you don’t know something, walk them through the process of how you find the answer so they can learn that important skill, too. Explain that you look for resources or seek help from a professional financial planner when the situation becomes to complicated to handle on your own.
What money lessons do you want to teach the kids in your life?