This is a guest post from Danny at Fix It Dads. Danny is a dad living in Philadelphia. He enjoys DIY projects almost as much as raising his two children. He is the co-creator of Fix It Dads, which offers tips for home improvement projects. Thanks, Danny!
As parents, we always want the best for our kids. We want them to live full and happy lives and we know that part of that is being financially responsible. It is important that we instill lessons about money into our kids at a young age so they will always keep that sense of responsibility in the back of their minds and never take what they have for granted. Here are some tips on raising a financially literate family.
Start with the Basics
Once your kids are at an age where they can retain information and understand what you teach, you should take that opportunity to educate them on the basics of money including introducing them to coins and cash and even explaining your credit cards. Tell them that even though you are buying something now, you are still expected to pay it back.
As you go through a store, show them the price tags and do simple exercises like having them count out how many dollar bills and coins they would need in order to buy something that they like.
When they get older and begin to retain the basics about money and the responsibilities that it requires, then you can put your lessons into action by giving them an allowance every week. In order to get their funds, they should be expected to complete a set number of chores so they realize that money doesn’t come out of nowhere and that they have to work for what they get. Now, when they see a toy at the store, they can look at their saved funds and determine if they have enough to buy the item. If not, they may have to wait until a later date. The kids may even ask to do more chores so they can save more.
Teach Them About Home and Business Ownership
It may be far in the future, but you can also teach your kids about ownership by explaining how they can one day own their own house. There are many lessons to be learned here, including how a house can be a long-term investment and also how the housing market goes as far as being a buyer’s or seller’s market. You can teach them how to determine the type of market it is by looking at the time of year, available inventory, and whether demand exceeds supply, among other concepts.
You can also teach them a bit about how money can help them to start their own business when they get older. Tell them that just like when they don’t have enough allowance money to buy that toy, they may also not have enough startup money to fund their new business. Teach them that in order to get startup money, they will need to live frugally or get a part-time job and that while it may be a struggle at first, the rewards are well worth the effort.
Be a Good Example
Parents can also do wonders to help their kids become financially literate by setting a good example. Don’t buy that brand-new car unless you can explain to your kids why you need it. If you do decide to purchase the car, walk them through your budget so they can see the specifics and how you justified the purchase.
While they may not quite understand, you can also teach them a bit about taxes. Tell them how you pay taxes every year, what that money goes towards, and how they can save money during the year to afford the expense.
As you can see, there are many ways to teach your kids about money. From teaching them about home and business ownership to simply setting a good example with your finances, there are many things that children can learn at an early age. Try the tips above and you will be proud of how responsible your kids become.