As parents, we want what is best for our kids and we do all that we can to help them be well-positioned for success in life. From our experience, two of the most critical skills to teach kids are proper social skills (another topic for another day) and instilling good financial habits. Let’s be honest, schools are not teaching this to our kids and society is full of traps to instill bad financial habits in individuals (i.e. overspending and taking on debt). You do not have to wait for your kids to be teenagers to learn proper financial habits and the sooner you start the better it will be for the long run. Just remember to keep it age-appropriate and below are some ideas to help you get started:
Automatically have them save a portion of their allowance or other times they receive money like birthdays, holidays or from the tooth fairy. We recommend a bucket approach with a spending account and a long-term savings account (i.e., car purchase, college, etc.). One of the most important lessons a child can learn is patience and delayed gratification.
Once or twice a year have them choose toys they no longer are interested in or play with and have them donate them to less fortunate kids. Toys are a kid’s “wealth” and having them learn charitable habits early is great.
Give your kids a budget for a reward (i.e., $20 for a good report card) and allow them to choose what they want to purchase. Help them understand options like is one big toy for $20 better than four toys for $5?
Involve them in charitable gifting each year. Give them a small amount like $25 – $50 (that is a lot of money to a small child) and have them choose a charity to gift the money to. As they get older have them do a presentation on the merits of the charity they choose.
Let them make mistakes. Experience is often the best teacher!
Encourage them to be entrepreneurial. Start a lemonade stand or have a garage sale where they can keep a portion of proceeds from selling their stuff.
The basic tenants of good financial habits (discipline, patience, and being intentional) will have lasting benefits as they will help them be successful in other aspects of life as well.