As parents, we are often embarrassed to share our financial struggles with our children. It's quite possible you've said the very common words, "Don't worry about money, kids. Let parents worry about money." Being in debt is highly stressful. We tend to think it's better to shelter kids from adult finances. We may think we could not possibly teach our kids about money because of the mistakes we've made. The truth is it is precisely our financial errors that make us the right people to help our kids stay financially healthy. Starting adulthood without any real-world understanding of money is a recipe for disaster. Here are a few ways to get your kids involved so they can make better decisions when they are on their own.
Start a Savings Account
This is the simplest step a parent can take to help their kids understand money. Open a savings account for them early. As they get older, they will begin to receive money at birthdays and holidays. Teach them to put some of that cash in the bank rather than spending it on things they won't remember. After only a few deposits, going to the bank will be a positive experience. By the time they start earning money from a part-time job, setting aside some of their pay will be a habit. And best of all, understanding a savings account can be the first step to understanding how to do more with their money.
Buy a Stock
Not all of us understand how to invest but the benefits of investing go a long way and the earlier we teach our kids, the better they will be for it. These days, investing in the stock market is easier than ever and doesn't require deep pockets. Investment companies like Robinhood make investing as easy as a few taps of a phone screen and often without trading fees or minimum share requirements.
Another option available to parents who wish to teach their kids to invest is Stockpile. This application allows fractional stock purchases so your kids can invest in the companies they know. At the time of this writing, Disney stock is at $137 a share. With Stockpile, you can purchase a portion of a share using the money available in the account. Your child can track the familiar logo and watch her investment pay off over time.
Teach While You Shop
Not all financial lessons need to go beyond the day-to-day family moments. We all have to buy groceries. Most of the time, our kids walk around the grocery store asking for anything in a brightly-colored box until we give in to one of their suggestions. But this experience can give us a couple of different ways to explain money.
The easiest way is to keep your child involved throughout the whole trip. Mention each item you are putting in the shopping cart, its cost, and why you are choosing to buy it. As you continue, write down the item and the cost, and add everything as you go. They will understand the cost of each trip as time goes by and grasp the concept of paying for everything we use.
Another option is to give your child a certain amount of money when you start the trip. It doesn't have to be much, $10 is plenty and $5 still works. As she begins to pick up things that get her attention, have her check the cost. Does she have enough to buy it? When the next bright box gets her attention, remind her and have her make a decision—possibly her first financial decision.
Give Them An Allowance
If your kids are young, you probably don't want to think about an allowance. You have too many bills to worry about already. But sooner or later, your kids will request it. Some parents refuse the concept while others agree to it and simply hand money over. In either response, it's a lost opportunity to teach.
Try setting a reasonable amount your child will receive at the end of the month provided they complete certain tasks. Make a checklist with the tasks and have them mark them off as the tasks are completed. This will quickly show kids money is earned, not found. If you've already shown them to save and invest, you know where that money will be going after they earn it.
Discuss Family Finances
Remember that debt is not a unique problem to your family. Many people are struggling with too much debt. Once you accept that fact, it should be easier to let kids in on the conversation. As their parents, you should be the ones to explain the dangers of credit cards or why it may not be a good idea to finance the dream car before having a career. This is your opportunity to give your kids the financial advantage you didn't have.
It's payday and you've sat down to pay the bills for this period. You have your utilities, rent, and of course, your debt payments. Let your kids see this process as you stretch your paycheck to make the necessary payments that keep a roof over their heads and help you get out of debt. Are you using the snowball method to decrease debt? Explain the process to them and show them how long you expect it to take if you stay on the plan.
Even if you are not sitting down with your family budget, take any opportunity to talk to your kids about money. The more lessons they get from you, the better. Our kids are listening, even those who pretend they don't (i.e., teenagers). Opening up about finances will be difficult at first but with time, it will feel natural and your kids will eventually thank you for it.
Learning about money doesn't have to be scary. Including your kids in your finances may even create a greater family bond as they grow. Teach your kids early and watch them go from saving birthday money to saving for retirement.