School is out for the summer, but that doesn’t mean kids have to stop learning until class is back in session this fall. When your kids are out of the classroom for the summer, you have the perfect opportunity to provide them with practical lessons and skills that will help them throughout their lives–like how to be smart with their money. Here are some practical tips and advice for raising smart kids.
Discuss Money Topics Early
Talking about money shouldn’t be something that children are shielded from. The earlier you introduce the concept of money, saving, and spending, the more normalized these topics will be to your children.
There are great ways to discuss money throughout their childhoods in age-appropriate ways. For instance, for younger children, you can discuss how much different items cost in the grocery store and compare which ones cost more money. Plus, you can have them count out the money to give to the cashier once it’s time to pay.
The older your children get, the more you can introduce topics like investing and budgeting. Either way, the earlier you can start talking about money, the better. This way, money will not become a mysterious thing to them that they aren’t familiar with and don’t know how to manage appropriately.
Open Your Child a Savings Account
If you haven’t already, visit a local branch and help your child open up a savings account. This is where they can save up birthday money or their allowance once they’re ready to graduate from a piggy bank.
Additionally, opening up a savings account introduces the idea of interest, so you can discuss the benefits of saving money in a bank and how interest works to grow your savings.
Introduce the Concept of Interest
Teach your kids about the power of compound interest and how it can impact your savings over time. Given how compound interest works, the earlier they can save, the better. Use the topic of compound interest to show them how saving money in a bank account or investment can grow over time, aside from the money they deposit themselves.
Teach Delayed Gratification
Encourage your kids to save for larger purchases instead of buying things impulsively. You can do so by helping them distinguish between wants and needs. Plus, you can teach them the value of patience and delayed gratification. Doing so will set your child up for a lifetime of good financial decisions and help deter them from making impulsive or irresponsible purchases.
Explain to your children the importance of prioritizing needs like food and toiletries over items they may simply want like a new pair of shoes or toys. Point out that having wants isn’t a bad thing; but, you may not always be able to get your wants immediately–especially if it will take away from your ability to get your needs taken care of first.
Lead by Example
Kids often learn by example, so make sure you are making good financial decisions in front of your children. They tend to mimic your behavior, so watching you save up for a big purchase or talk about money mistakes you’ve made in the past will help them build a healthy relationship with money.
This can open your family up to important discussions about why you save, how you make money decisions, and how even small spending habits can make a big difference over the long run.
Set Savings Goals
Teach your kids the importance and power of saving by helping them set savings goals for themselves. Help your kids identify something they want to save for, such as a toy or a game. Encourage them to save a portion of their allowance or any money they receive as gifts into a piggy bank or savings account.
They’ll be able to watch their savings grow as they approach their goal. This will help them get a better idea of how much time it takes to save for a product they want.
At any age, you can encourage entrepreneurship in your children to help them become more money-savvy. Part of raising money-smart kids is teaching them how to save and utilize their money effectively. But, the other part of the equation is showing them how they can earn money too.
Help your kids start a small business, such as a lemonade stand or pet-sitting service. This will teach them about earning money, managing expenses, and customer service. When your child puts in the work to earn money, they may find more value in it and be more compelled to save it up or spend it on a well-thought-out purchase.
Show Them How to Comparison Shop
Show your kids how to research prices and quality before making a purchase. Teach them to look for the best value for their money by comparing two or more items. You can also talk about coupon clipping, shopping at bargain outlets, overstock websites, and more.
Basically, you can show them that where they shop can play a role in the prices they’ll pay just as much as selecting the right items. Plus, you can talk about why the prices of certain items may fluctuate, and when things might cost more like when they’re out of season or if there’s a shortage of the item on the market.
Role-Play Real-Life Scenarios
You can talk about money topics with your kids all you want, but putting these teachings into practice will help cultivate real habits that they can take with them throughout their lives. So, create scenarios where your kids have to make financial decisions, such as budgeting for a family outing or saving for a special event.
Role-playing will help them develop critical thinking skills like figuring out how much money they’ll need for the event, how much time it might take them to save up this money, and other important details.
Teach Them About Credit
As your child grows older, you can introduce the concept of credit and explain how it works. Teach your kids about responsible borrowing and the importance of paying bills on time. As an exercise, you can lend your child a small amount of money and agree on a formal repayment plan to show them how borrowing looks in the real world.
Once they become old enough, you can help them apply for a credit card or add them as an authorized user to yours to teach them how to use it responsibly to start building their credit.
Encourage Critical Thinking About Advertising
Teach your kids to be critical consumers by discussing advertising techniques and how they can influence spending habits. Help them develop a healthy skepticism towards marketing messages like massive clearance sales or buy-one-get-one tactics. Show them how these tactics can drive consumers to feel like they’re getting a good deal so they make the purchase.
This concept connects back to the conversation of wants vs needs and delayed gratification. Through enough discussion and practice, you can help your child assess when they actually want something as opposed to making an impulse purchase in the moment.