While they may excel in other areas, most schools do a terrible job at financial education. As a result, many high school, and even college, students are graduating with only a rudimentary understanding of critical subjects like saving money, investing well, and delaying gratification to afford major purchases.
The results of this lack of financial education are all too obvious, with trillions of dollars in credit card debt, five and even six-figure college loans at graduation, and a troubling percentage of high earners still living paycheck to paycheck. If you want your own kids to overcome those long financial odds, you need to step in and do the job the schools are not.
Raising money-smart kids is the responsibility of every concerned parent, and you do not need a Ph.D. in finance to get it done. With a few simple strategies, you can teach your kids about money, investing, and other vital financial lessons they need to know. Here are some easy ways to get started.
1. Set a Good Example
No matter what else you do, setting a good example is the number one way to encourage fiscal responsibility in your own kids. If you are buried under a mountain of credit card debt and still paying with plastic, no amount of lectures will convince your kids not to follow suit. Setting a good example will be good for your kids, but it will be even better for your own financial well-being.
You can set an example with everything you do, from the weekly trips to the grocery store to your monthly bill-paying marathon. Letting your kids in on the family finances to an appropriate extent can be wise to do if you want to raise money-smart kids. They don’t need to know every detail of your earnings, but a healthy dose of reality about where all your hard-won wages end up can be eye-opening.
2. Make Investing Fun
Investing for the future can be tedious even for adults, so just think how dull it must seem to young people. If you want to get your kids excited about the stock market, you need to find ways to make it relatable, and one way to do that is with kid-friendly companies.
The next time you head off to Disneyland, skip the overpriced mouse ears at the gift shop and buy your kid a share of Disney stock instead. If a whole share is not in the budget, apps like Robinhood and WeBull let you buy fractional shares, so your son or daughter can own a tiny slice of their favorite theme park.
It’s not just Disney, of course – there are countless examples of kid-friendly stocks, from McDonald’s and other fast-food chains to Hasbro and similar toy companies. Even in fractional shares, buying stocks is a great way to get your kids excited about investing.
3. Encourage Your Child To Open Their Own Bank Account
Having a bank account is an entry point into all things financial and a great lesson for kids of all ages. Many banks offer special accounts specifically for young people, complete with prizes, saving contests, and even toys.
Once your child has a bank account, you can encourage saving with a bit of generosity of your own. Offering to match the amount your child saves is a great way to promote fiscal responsibility at a young age, and hopefully, your son or daughter will remember that lesson when they go to work and invest in their own 401(k) plan.
Help your older kids set up a checking account to learn how to allocate expenses, withdraw funds, and deposit and write checks.
4. Demonstrate a Solid Work Ethic
Take-your-child-to-work day only happens once a year, but you can demonstrate your work ethic 365 days a year. Simply watching you head off to work or your home office every day will provide an essential lesson for the next generation, and if you have a side gig like taking surveys for money, you can demonstrate your commitment in an even more direct way.
If you have a side hustle delivering food or groceries, let the kids come along. They can pick items off the shelves, walk deliveries to the door, keep track of incoming orders on your smartphone or just hang out with you as you make extra cash for the family. No matter what role they play, your son or daughter will learn a lot about the world of work, which is an excellent plan for everyone.
5. Give Your Kids an Allowance and Teach Them How To Budget
This last tip can work for children of all ages but can be especially helpful for older kids who are preparing to go out on their own.
If you usually take care of your child’s incidental expenses like toiletries, clothing, snacks, and other necessities, calculate how much you spend on these items and give the money directly to your kid instead. Of course, the expectation here is that they will need to purchase these things on their own from now on, so you’ll also want to help them set up a budget to do just that.
For an even more advanced level of preparation, calculate their “share” of rent and utilities and deposit the money into the aforementioned bank account. They will need to then “pay” you using a check from their account. Yes, they are essentially paying you back your own money. However, while it may seem like an additional unnecessary transaction, you are helping them set up good habits for transitioning seamlessly into adult responsibilities.
Don’t forget to teach them that financial privileges come with responsibilities as well. Assign them chores and tasks to do around the house to earn the funds you’re handing over.
Raising financially savvy kids has never been more critical or more challenging. Managing finances wisely is a top priority for most families. And while getting the next generation involved can be a struggle, parents still have some innovative ways to get it done. The tips listed above can help you get started, so your kids can become financially successful.