Help Kids Develop Money Management Habits
At our Illinois summer camp, we focus on intentionally empowering campers during our girls-only and boys-only camp sessions. We help them with the concept of economic literacy both with direct activities that help them learn the concepts, and also with their awareness and management of their limited camp store budgets—their spending money for their time at camp. We recognize, and try to help our campers recognize concepts like waiting to make purchases and choosing wisely whether to spend or save (or donate to worthy causes).
I recently checked out a couple of blogs with some tips that parents can apply at home. Below are some good takeways from the full articles located here by Jessica Ashley and here by Beth Kobliner.
Have frank talks about money with your child; it’s never too early!
- Because money habits can be set early, you should start talking about money as early as age three, to emphasize basic financial concepts like delayed gratification and making choices.
- Let kids know that money is a finite resource. Create a list of things you will or won’t pay for, then make your child’s allowance not completely their expenses or desires. Offer opportunities to earn extra money, hopefully incentivizing earning and building work ethic.
- Institute a mandatory wait-time before any big purchases. Discuss the costs, along with pros and cons, and then revisit it all two weeks later to stretch critical thinking skills (and dollars).
- Be open about the family expenses. Children will benefit from knowing real costs of living independently.
- Talk about paying for college. Because the average current college grad will owe almost $35,000 in student loans, you should begin seriously talking about college when kids are in the ninth grade. Cover key points such as: How much will you contribute? How much in loans is your kid willing to take on? What are some schools that could work within your family’s budget?
Develop your child’s money management skills.
- Avoid paying allowance for basic chores. Chores are about being part of the family; allowance shouldn’t be given for completing tasks your kids should be doing anyway.
- Instead of compensating for everyday chores, pay a flat 50 cents or $1 for every year of age—so a 10-year-old kid would receive $5 to $10 per week in allowance. And only give additional money for true “extras,” like tutoring a sibling or doing the whole family’s laundry.
- Encourage saving, and let your kids reap the rewards. Facilitate the joy that comes from setting a goal and achieving it. Saving for a goal gives a child the responsibility of having his/her own money, the chance to make choices (like buying one big item over smaller ones) and the patience required to save—all of which will help set him/her on the lifelong savings path.
- Allow your kids to experience consumer dissatisfaction, i.e. if a child buys a toy that breaks, instead of simply replacing it, take your child back to the store to have it replaced; explain the importance of holding onto the receipt, and rehearse what s/he will say to the salesperson when asking for an exchange. This will show your kid not only how to be assertive, but also the basics of becoming a savvy shopper.
- Teach kids how to use plastic responsibly. Because credit cards don’t hurt the way parting with actual cash does, at least early on, consider keeping them cash-only to force them to learn hard-stop budgeting. And be sure to instill this key lesson: One should only charge what one can afford to pay in full each month.
Make money visible.
- Describe electronic processes like ATMs and credit cards. Let them see you deposit money, not just get a pile of bills out of an ATM or throw down a credit card. If your money comes in by check or direct deposit, walk your kids through the process.
- Play games at the store, like “Who can find the cheapest toothpaste or shampoo?” Then work a money lesson into the exercise and explain that whether it’s the fancy $12 brand or the $3 generic, it’s all basically the same stuff.
- Consider resources such as: Mint.com or free budgeting apps. Many banks offer special accounts and programs for parents who are interested in teaching their kids to spend wisely.
Be positive about how you earn money.
- Studies show that parents’ feelings about their own jobs play a vital role in whether their kids see work as a job, a career or a calling.
- Venting about your awful day at the office might help you blow off steam, but it also could be giving your kid a negative view of work. Even if you don’t love it, you can probably say that it’s better to have one than the alternative scenario.
- Change your job (if you can) to something you love, or find the thing you love about your current job—and emphasize that.
Let your kids know that money mistakes happen.
- Tell your kids about a financial misstep you made. Explain how you remedied (or are working on) the situation.
- Don’t bail out your kids financially. When the phone call comes that there’s no more money in the account, don’t bail them out if it’s not an emergency. Turn the situation back over to the kids with questions like, “How are you going to handle that?” or “What do you think you’ll do differently next time?”