It’s hard to know where to start when teaching children financial responsibility. Luckily, teaching positive messages about money doesn’t take much. You can teach your children emotion-neutral language for money, to use money as a tool, curb spending, save for goals, shop, look for sales, and stick to a budget. All it takes are a few simple steps.
1. Start by Using the Right Words
Use the word “budget,” and keep the discussion emotion-neutral. Explain to your children you are “checking the budget” when you see if you have money for something. If they ask for something they want, “check the budget” and then let them know if there is money “in the budget” for it or not. The wording here is key because it is not about whether or not you have money but if you have money set aside for what they are asking. As parents, we know the money in the bank may be for the mortgage and not a new toy, so teach your kids having money doesn’t mean you spend it. Help them learn you use money when it is set aside specifically for a purchase. This creates a new framework for them, and soon they will start to ask “do we have money in the budget for this?” When you hear this, take a victory lap!
Lessons Learned: Budget language reinforces the mindset that money is a tool, and teaches your children how to stick to a budget. This is the first step towards financial responsibility for your children.
2. Learn to Say “No” and Create a Plan
Saying “no” to our children is not easy, and yet we still need to do it. By not getting everything they want all the time allows them to learn patience and planning, two key aspects of financial responsibility. How do you do this? When you tell them “no” explain why. Use the emotion-neutral budget language above. If it’s something you can save for, explain that as well. Create a plan to see how much you or they can save each week/month until the money is budgeted. Incorporate chores or other tasks for the child to earn money towards the item .
Lessons Learned: Saying “no” teaches children delayed gratification and planning for what they want. It also helps them learn to wait and put in the effort for what they want.
3. Take Your Children Grocery Shopping
Grocery shopping is an invaluable life skill so don’t skip this one! This has made the most impact on my children’s education about money. This is where financial responsibility all comes together.
Make a list, set a spending limit, and recruit the troops! For younger children, talk about how you shop while you shop (like a running dialogue with a baby). Once the children are older they can help find prices and scout for sales. The lower priced items are often on the lower shelves so this is ideal for younger children. Older children can calculate totals and keep track of how close you are to your budget limit. If you go over budget, talk with them about what you need to do or put back to get back under the spending limit.
If you choose to give them a small treat allowance, give your child a set amount they can spend and let them shop for themselves. I’m always surprised how fast my children ask for things if they are spending “my” money, but, if they have to use their “treat” money there is much debate and thought that goes into it!
Lessons Learned: Involving your kids in grocery shopping can teach the costs of basic life essentials, how to comparison shop, sticking to a spending limit and choosing what is most important to them when faced with a tight budget.
Your children don’t need a formal financial education to learn financial responsibility. Start small, be consistent, and they will be on their way to a strong financial future.
Sarah is the owner of SB Financial LLC, a financial coaching company that uses customized, flexible and values-based financial planning to empower women to lead more meaningful and fulfilled lives. She is the proud mother of 3 children ranging in age from 17 to 3 months and is a self-proclaimed Harry Potter, Firefly, and Star Trek nerd.