Your kids learn their money habits from you. Try these suggestions for setting good examples:
1. Teach the Value of Saving
USAA member and veteran teacher Karyn Hodgens and her husband created a spreadsheet to explain the concept of compounding to their free-spending son. “Something clicked. He said, ‘You mean I’ll earn more money just by letting it sit there?’ He was an instant convert,” Hodgens says. Soon, she and husband John, a software engineer, developed KidsSave, a software program that creates virtual accounts to track the real money in piggy banks.
2. Share the Gift of Giving
USAA member Susan Beacham gives her teenagers coupons for family outings. Sometimes, the coupons are just for fun events, like a Milwaukee Brewers game. Other times they may include a lesson, such as a coupon to purchase a purse made by refugee-women-turned-entrepreneurs and an invitation to meet them. “It’s important that my daughters—and all kids, really—see that charity isn’t just writing a check. It’s about helping real people,” says Beacham, a former investment advisor who founded Money Savvy Generation, which offers a four-chambered piggy bank that teaches children how to save, spend, donate, and invest.
3. Use Technology
Tech-savvy kids have plenty of options for online money-education sites, such as kids.gov. But before they play with virtual money, they must be comfortable with the real thing. “They need to touch dollars and coins, count them, stack them, and learn that they’re concrete things,” says Neale Godfrey, author of Money Doesn’t Grow on Trees.
4. Walk the Walk
Kids watch more than they listen to lectures, Godfrey says. Beacham agrees: “You may be the greatest money manager in the world, but if you don’t show and tell your children what you’re doing, they can’t learn from you.”
5. Make Allowances Count
“An allowance teaches children the natural consequences of money: The only way to get it is to earn it,” Godfrey says.
So what’s an appropriate allowance? She suggests:
- Depending on your budget, paying your children $1 each week, or every other week, for each year old they are.
- At age twelve, encouraging your children to earn extra money for neighborhood jobs, such as babysitting or dog walking.
- Weaning them off allowance by age sixteen, when they can work part-time or summer jobs. By then, you should only pay for necessities, such as clothing.
Beacham suggests that kids pay for actual expenses—such as school supplies or video game rentals—with part of their allowances. “It teaches kids how to make hard choices,” she says.
