Learning how to save money is something we all should have learned as children — but most of us didn't have the chance or were never instructed on how to be responsible with our income. Instead of perpetuating the cycle of young adults who don't know how to live within their means, how can you teach your kids how to save money — preferably before they're out on their own?
1. Pick Out a Piggy Bank
For little ones that might be too young to open a custodial bank account, head to the store and let them pick out a piggy bank. These cute little creatures come in all shapes in sizes — I've got one that looks like Toothless from "How to Train Your Dragon" — so they're sure to find something they like.
While you're searching for the perfect bank, talk to your children about the importance of saving money. You don't have to go into specific details, especially if your kids are on the young side, but use a toy or something that catches their eye as an example. Tell them that they'd be able to buy that toy if they saved their money, and point out how they can use a piggy bank to do that.
2. Talk About Money
It's tempting to shield our children from the responsibilities of being an adult, especially where money is concerned. We pay our bills behind closed doors and wait until they've fallen asleep to discuss any problems or worries about our incomes.
Your children will have the same responsibilities once they reach adulthood. The earlier they're exposed to this fact, the better prepared they'll be to deal with it. Get them involved in paying bills as soon as they're interested. If you're discussing a large purchase, ask their opinion. For older children, you can show them the budget or your bank statements and ask them if they think you can afford to buy a new car or replace the aging refrigerator.
Making them think about it now means it will be on their minds as they head out into the world, get jobs, earn money, and rent or purchase their first homes.
3. Make Them Earn It
How many of us had an allowance when growing up, that we didn't have to do anything to earn?
Don't feel sorry about raising your hand. Ours is up there with yours. For many parents, just handing over spending money every week or month is more comfortable than the inevitable fight that occurs when you try to get them to do chores or earn their allowance money.
If you're trying to prepare your little ones to be functional adults, an allowance they don't have to earn is unrealistic. Instead, set up a chore chart with age-appropriate tasks for each child and assign a dollar value to each one. Not only does this serve as an incentive to get them to make their bed or brush their teeth every morning, but it also introduces them to the concept of earning an income.
4. Practice What What You Preach
We try our best to tell our children what to do, but that doesn't usually work. Kids want to be just like mom and dad, so instead of doing what we say, they mimic us. If you're telling them to save money while spending all yours, they're not going to learn anything.
One of the most critical things you can do to teach your kids about money is to practice what you preach. As you're working through these steps with your children, take the time to apply them to yourself as well. You may end up learning something new while you're teaching them how to manage their money.
5. Talk About Debt
Contrary to popular adolescent belief, credit cards are not free money. We need to do our very best to disabuse them of this notion before they're old enough start sending out credit card applications. Consider this just another one of the "coming of age" talks. Around the same time you discuss sex, provide them with the debt talk as well.
Teach them about how credit works, what interest rates are and how they raise the cost of your balance if you don't pay it off in full every month. If you're not 100 percent sure how these things work yourself, head to the bank. Bankers are usually more than happy to pass on their knowledge to help teenagers and young adults learn how to navigate the sometimes dangerous world of credit cards.
6. Don't Forget Taxes
Do you know how to do your taxes? If you answered yes, how old were you when you learned? Most of us didn't figure it out until our mid-20s at the earliest, and some people don't even know how to do their taxes at all. Instead of learning to navigate the ever-changing tax code, they prefer to leave it to the professionals.
The first time your child will have to file their taxes will probably be the easiest — they'll be submitting as single with no dependents, and only need one form. Teach them how to do this, instead of spending the sometimes hundreds of dollars to have it done by a tax prep service. Understanding how taxes work will help them manage their money before they start having federal and state income taxes deducted from their paychecks.
Don't Stop Talking
Our world revolves around those little green pieces of paper we call money, and your children will need to know how to manage them before they head out into the world. Don't stop talking to your children about saving money and spending it wisely. They'll thank you in the long run, even if they get annoyed that you won't buy them that new toy or gaming console immediately.