Having kids is the joy of a lifetime for parents, but they come with a high cost. During the summer, bills pile up, as the kids want to stay busy at the pool or camp and eat-up at the ice cream truck. Yet it is never too early to make your kids aware of financial responsibility, whether it be savings accounts, checking accounts, or rent.
“The importance of starting young is because finance touches everything in our lives,” said Liz Frazier, a certified financial planner and author of the new book “Beyond Piggy Banks and Lemonade Stands: How to Teach Young Kids About Finance (And They’re Never Too Young)." “But most adults are really uncomfortable with finance and they are intimidated by it. But it’s for a really good reason, no one taught them.”
Here are Frazier’s basics for teaching finance to your kids:
- Teach the difference between needs versus wants: This is useful in setting up a budget. Needs come first, and wants come later.
- Finding resources to make decisions: The best way to do this is with an allowance. Giving your kids some money forces them to use it in a responsible way they want. And it doesn’t matter how much it is, giving even the smallest amount gives your kids practice in saving and learning from mistakes.
- It is simple once you get the hang of it: Giving kids some practice allows them to develop skills and then they will grow up knowing how to use their money responsibly.
- Buying when you need it and saving when you don’t: This is a big one. To teach your kids how to save, make it exciting for them so it becomes a habit. For example, have them save for something realistic like a new Lego set, and create a goal poster with achievement milestones to keep them motivated.