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Five ways to teach your kids good financial habits



The pandemic has turned many full-time working parents into teachers – juggling child care with schoolwork and a career. Despite the fact that school districts and educators are working hard to keep children engaged and learning, money management is rarely part of the curriculum. Now is a great time to add financial literacy to your kids’ lesson plans to help them build strong financial futures.


Start talking to your children early about money – a good grasp of personal finance is one of the most valuable life skills you can teach them. Introducing kids to money in the ‘real world’ as early as possible helps them develop a better understanding of basic financial concepts such as spending, saving and even building credit.


It’s important they also realize you’re financially invested in their future. Let them know that you’re planning ahead for their higher education – talk to them about how you’re committed to helping them avoid student loans and have opened a 529 account or another savings vehicle.


Here are some tips for raising your kids to be smart with money and spark conversations that will set them on firm financial footing.


1. Set a good example

Money scripts are the relationships we build with money during our formative years – research sugests they are embedded within us as young as 5- and 6-years-old. These scripts highly influence our financial behaviour as we grow older, and are often formed by how we see our parents interact with money. So it’s especially important to show your kids smart money habits early on, such as paying bills on time and managing discretionary spending appropriately. This includes things like shopping on a set budget, using coupons and discount offers to pay less for goods, and making choices between new and used goods.


2. Create opportunities to earn money

Encourage your kids to learn how to earn. Depending on their age, they might do yard work for neighbors or offer babysitting services. Alternately, many parents begin paying their children an allowance in exchange for completing chores around the house – loading the dishwasher, mowing the lawn, raking the leaves in autumn or shovelling the snow in winter (pay can be commensurate with children’s ages). It’s a great life lesson understanding there’s pride in doing a job well and receiving a wage for it. Children often treat hard-earned money more carefully than just being handed allowances. More menial jobs especially also build character, helping to prevent them feeling entitled. And don’t forget that for older kids, a part-time job during high school always looks good to colleges and first-time employers.


3. Give them real-life experience

There’s no substitute for hands-on understanding so get your kids in the habit of saving by giving them a piggy bank or savings jar. As they get older open a bank account with a debit card and have their allowance sent to it automatically. However, make sure you explain that they’re spending real money when they use their cards – it’s very easy to not fully appreciate this when you aren’t handing over cash. It’s also important to differentiate between a credit and debit card, explaining that debit cards prevent you from overspending as you can on a credit card. The key thing to teach is that credit cards are not “free money” and should never be used without the money to pay the balance in full each month. And, if you have older children who are college-bound or perhaps buying a car, it’s a good time to share how to build a strong credit history.


4. Teach them how to budget and set goals

Use everyday activities like grocery shopping and going to the ATM to teach your kids about budgeting and give them the opportunity to ask questions about what they can and can’t choose to buy. As they get older, allow them to spend their own money on non-essentials and expensive items that don’t fit your budget. Talk to them about smart shopping techniques, differentiating between wants and needs, comparing prices and watching for sales. Helping learn to delay their desire for instant gratification for a “long-term” reward will enable them to develop budgeting skills and save up for special items that they really want in the future.


5. Set up saving accounts

Investing in your kids’ future is doubly important. Doing this not only means they’ll have more opportunities as they grow older, but it’s also a great opportunity to teach them about saving for the future and to explain the benefits of compound interest overtime. In addition to opening a 529 plan for them as soon as possible, you can also open a Roth IRA. Make sure you involve your kids in each step of the process: show them how to open the account, how to move money into it, and how to pick investments and why. Then, each month go over their statement and explain how to read it. The monthly fluctuations in the account are great examples of how savings grow. Add some math into the equation to show them how much that $2,000 could be worth when they’re 60 with the power of compounding.


Talk about good habits

The most important thing is to open up the dialogue to teach children about money from a young age. It’s never too early to teach good habits and the sooner you start helping them learn about responsible money management, the more you’re setting your kids up for financial success later in life.

Stefan Muoio Michael Tornatore

m. (585) 698.5041 m. (585) 415.1904

p. (585) 475-8461 p. (585) 475.8421



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