No matter what your financial situation, talking about money can sometimes seem uncomfortable, but it’s important to teach your children financial literacy – and to teach it to them again and again. The best way to teach is by example, so that your children can gain valuable, lifelong lessons.
Be Honest with Your Children About Money
A study by T. Rowe Price in 2012 found that 77% of parents are not always honest with their children about money, and that 15% lie routinely. Lying about money does nothing to help your children understand the financial realities of adulthood. When children are not aware of how money works, they may have a harder time becoming financially responsible adults.
Experts recommend paying attention to your language. Instead of saying, “we can’t afford it,” for example, you might say, “that’s not a priority right now.” That way, your kids will come to understand that financial responsibility involves making good decisions.
Set A Budget and then Talk About It
Budgeting is a way of life for financially healthy people and families. Parents can make their children aware of the family budget and get them involved by challenging them to help the family stick to it. For example, you could create budget-friendly activities such as making mini pizzas at home rather than going out to dinner. Staying within a budget can become fun as well as rewarding.
Set Financial Goals and Share Them with Your Children
Where do you want to be financially at this time next year? How can you get there? Whether you have a goal to take a vacation, buy more wholesome foods, or redecorate your children’s bedrooms, you can keep your children posted on your savings progress. You also can enlist free digital tools such as Mint to set goals and watch your money grow over time.
Teach Your Children About Making Money from Money
One of the best ways to be a financial role model and prepare your children up for long-term financial success is to teach them about making money from money. For example, you could teach them about simple interest vs. compound interest by taking out a CD or another relatively safe, simple financial account, and you could teach them the difference between banks and savings bonds and credit unions, and how interest rates and account requirements can differ at each institution. For more information about teaching your children about interest, check out this post on ConsumerFinance.gov.