5 Money Lessons to Teach your Kids

Financial Education for Children

5 Money Lessons to Teach your Kids
February 17, 2016

Children learn from everyone in their lives. While traditional topics such as math and science are often taught in school, money is a topic that many kids never learn much about other than through observation. That needs to change.

Kids should learn about money throughout their childhood so that they are prepared to handle their own finances when they head off into the real world. Below are five important money lessons your children should learn. These are just the start, but they are a great foundation.

1. Teach Kids How to Earn Money - Early on, children receive money through birthday cards, Christmas cards or even their allowance. Unfortunately, as we all know, money is not just handed to people after they've grown up. Instead, they have to work to earn money.

Teaching children how to earn money is a great skill that will prepare them for the workforce and the rest of their lives. An easy way to instill this concept in kids is to have odd jobs they can perform to earn extra money. These tasks should not be ordinary responsibilities, since even adults are not paid to do their own laundry. Instead, they should be tasks that go above and beyond the typical daily household chores, and which may ordinarily be done by outsiders. Practical examples include mowing the lawn, washing the car or removing snow. An even more enterprising child might be encouraged to start their own small business, like setting up a lemonade stand, or baking cookies to sell at school.

2. Teach Children They Do Not Keep Every Dollar They Earn - Many kids do not realize that they do not get to keep their whole paycheck when they get their first job. Instead, they see that deductions are taken out for social security taxes, federal taxes, state taxes and other items

To prepare your children for this reality, you can set up the parent tax. Whenever your kid earns money, keep a certain percentage of it before paying them.

Of course, nice parents will set this money aside for their kid's future grown-up self in a savings or investment account, which can be seen as a precursor of Social Security.

3. Teach Kids How to Save and Invest - Most children are never taught how to save and invest because many parents never actually save or invest themselves. Take the opportunity to set your kids up for financial success by showing them how to set money aside for their future.

One way to do this is to have your child reserve a percentage of every dollar they earn for either a short-term or long-term savings goal. These goals can include things like gaming systems, their first car or even college. Based on these goals, you can explain the differences between saving and investing, then allow them to choose which method is right for a particular goal.

4. Teach Children About Different Forms of Money - Children easily associate the concept of money with physical cash and coins. However, learning that money can exist digitally in your bank account, on your debit card, or even as debt through a credit card, is a harder concept to master. It is extremely important to teach kids how to manage their non-cash money, because our world is evolving to use less cash every day.

To teach children that money is more than just cash, consider paying their allowance, and any other money they may earn, to them in a checkbook register. Teach them how to record all of their transactions and how to determine their current balance.

Then, whenever they need money, have them withdraw it from their register as you hand them cash. If your child can master this concept, hopefully they will not struggle with balancing their bank account or going into credit card debt by using money they do not have.

5. Teach Kids That Money Is Not Everything - Finally, the most important finance lesson to teach kids is the fact that money is not everything. Many people get obsessed with money and the desire to earn or accumulate more of it. Instead, make sure your children know that money is simply a tool to make purchases. It cannot make you happy and it will not lead to a fulfilling life on its own. Friends, family and living life to the full are all important. Money is just a small part of that equation.

Remind your kids that how they handle debt will affect their credit scores. You can check your credit score and read your credit report for free within minutes by joining MoneyTips.

Photo ŠiStockphoto.com/3sbworld

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Crystal | 09.07.15 @ 04:15
Very good information. I'll be sure to keep this mind
Victor | 09.07.15 @ 04:24
I wish my kid knew how to read so i could show this to him, but as always, great info from MoneyTips.
Beverly | 09.07.15 @ 04:27
Sone really good tips! The hardest one for kids to learn is that a credit card isn't just free money.
Elaine | 09.07.15 @ 04:29
Teach them young is what I say.
Chelsey | 09.07.15 @ 04:33
Oi, I have had the hardest time explaining to my daughter that we don't have an unlimited supply of money. She is convinced that there is a store we go to that they give us money!
Ambar | 09.07.15 @ 04:33
I always enjoy this kind of tips, thanks for great info
Britt | 09.07.15 @ 04:37
I think it's a good idea to start teaching kids early on how to appreciate money.
Kyle | 09.07.15 @ 04:43
great article and lots of awesome information
Nancy | 09.07.15 @ 04:51
I wish I had read this when my kids were younger. I love the.idea of a parent tax!
Angie | 09.07.15 @ 05:04
Great article! It is best to teach them as young children about finances. The concept of saving is the hardest to embrace, though.
Erin | 09.07.15 @ 05:06
Great tips to help a child be responsible with their money.
Jo | 09.07.15 @ 05:06
Teaching kids about money and saving and spending from a young age is very smart.
Apryl | 09.07.15 @ 05:33
Excellent lessons to share!
Steffanie | 09.07.15 @ 09:35
Great information!
Jackie | 09.07.15 @ 10:07
Great article. Kids need to start learning at an early age about managing money.
Wanda Langley | 09.07.15 @ 10:35
Great advise to start them out young so that they know what to expect later on in life.
irene | 09.07.15 @ 11:19
Great information. My son was raised with most of this information though he was surprised when he got his first job at how much tax was taken from him.
Daniel | 09.07.15 @ 11:42
Starting a savings with your kids young and keeping them involved will hopefully put them on a good track for their savings future
Selena | 09.07.15 @ 12:02
I like the teach kids how to save and invest part. This is such a hard things for adults to do, it's good to teach children to do it.
Crystal | 09.07.15 @ 12:12
They also need to learn early on how to balance a checking account and budget. These seem to be lost arts.
Morgan | 09.07.15 @ 12:14
It's never too soon to teach kids about the value of a dollar
Christina | 09.07.15 @ 12:17
A lot of good tips.. My kids will be reading this..
steven | 09.07.15 @ 12:41
Good information. Hopefully as the little one gets older i can instill some of this.
Sara | 09.07.15 @ 12:51
With a toddler trying to teach her that she does not get everything she wants is hard enough most days. But she even knows that money is not the key to happiness.
trish | 09.07.15 @ 13:11
Definitely some great tips, Glad to see some that I do are already on the list!
Sarah | 09.07.15 @ 13:12
I am a huge believer in teaching children about money early on. These are some great tips on teaching them.
Kate | 09.07.15 @ 13:15
Very useful information to teach my kids. I have three boys and this will come in handy to start to teach them money management. Hopefully then they will be ahead of the game when they are older.
Rychana | 09.07.15 @ 13:16
These are great tips. I will have to share with my friends that have kids.
George | 09.07.15 @ 13:22
Good tips I will be sharing with my kids.
Ron | 09.07.15 @ 13:33
We have taught our son accountability. He breaks something, he pays for it. If he needs something, he saves for it.
Leah | 09.07.15 @ 13:52
Great information!
Zanna | 09.07.15 @ 14:11
From an early age, I believe it's important to teach them to put some to save, some to spend and some to give away to a charity or other cause they believe in and to have a "big purchase" goal for part of the money they save.. These habits will help them as the money amounts they earn get bigger.
$commenter.renderDisplayableName() | 11.25.20 @ 05:17