Ways to Teach Your Kids Healthy Money Habits

The COVID-19 pandemic has been a time for saving money and tightening up budgets. Now more than ever, kids are seeing their parents restructure their budgets, cut out unnecessary expenses, and work side hustles to earn extra cash. Many parents feel that talking about finances, especially personal family finances, with their kids is taboo. However, without that context and those lessons, our kids won't learn what money mistakes to avoid as they get older. Here are some ways to set your youngsters up for future financial success. 

Talk About the Family Finances 

This seems ridiculous, but hear me out. Without giving family budgetary changes the proper context, your kids won't start to grasp the ideas of budgeting, saving, and how to change your finances during a recession. If you keep them in the dark, they won't have these lessons already ingrained when they step into adulthood. 

Have age appropriate conversations about money and be honest when times are tough. You can assure them everything will be okay and teach them about the circumstances in which budgets need to change. 

Teach Them the Value of a Dollar

Find ways to teach your kids from an early age about what the meaning and value of money is. Whether you give them an allowance, cash for odd jobs, or big birthday checks, find ways to teach them the value of money when they have it. Encourage them to save when they have small amounts of money come into their possession. 

It sounds harsh, but avoid just buying them what they want when they want it. Of course gifts and specific rewards are one thing, but encourage them to save up and buy toys or video games with their own money on a general basis. 

When your kids have to pick and choose how they spend or save for items they want, they will naturally start learning the value of money. They'll also start asking themselves how much time or work will go into accruing money, which is an incredibly important and valuable lesson. 

Teach Them How to Budget

When they're old enough to understand the concepts behind budgeting, sit them down and really teach them how to structure a healthy budget. 

Show them spreadsheets, apps, or whatever tools you use for budgeting and have a transparent conversation about spending and saving. For an interesting activity that will give them food for thought, come up with some mock budgets together using different budgeting tools. This will help them start to figure out how they like to budget and encourage them to think about their future.

Make sure to answer any questions they have honestly and be open about things like debt, overspending, and what lessons you want them to learn from your own mistakes.

Teach Them About Debt

Again, the key to teaching your kids about finances is being honest. Teach them about budgeting to repay debt balances, APR and interest rates, minimum monthly payments, and everything that goes into having debt. 

Also, teach them about good debt and bad debt, and the differences between manageable debt and out-of-control debt that can lead to delinquent loans and sometimes bankruptcy. 

Teach them from a young age that some debt makes sense and there's nothing wrong with having student loans or a manageable credit card balance. Teach them about paying balances before accruing interest and about the dangers of predatory credit cards and lenders.

It's grad season, so make sure to sit your high school graduates down and have an honest conversation about predatory credit cards. These card offers will likely have pamphlet ads and offers spread around their college campuses or coming to them in the mail. Make sure they aren't fooled by these ads and offer to help them choose their first credit card if they need one. 

Without having open and honest communication about these concepts, your kids could fall into unhealthy money habits or even predatory debt. Help your kids take their first steps into adulthood with their best foot forward, help them learn from your own money mistakes, and set them up for future financial success.