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It’s safe to say, the more kids learn and master basic money skills, the better off they are as adults.
And the wiser and wealthier they’ll be.
Kids and money need to have a better relationship. They need to get to know each other as early as kids get to know their crushes.
Kids need to be able to make money mistakes and learn while their young, so when their adults, they would have already figured out the right way to wealth.
Teaching kids basic money skills while their young is incredibly important if we want the future of society to be better than we are right now.
In 2018, according to Nerd Wallet, the average household debt was about $135,768, including car and mortgage loans.
If you’ve been a long time reader, you already know that my mission is to help fellow moms learn how to manage money and become debt free.
But, being a mom, I also have a passion to teach kids (including my own) how to sidestep our pitfalls so they don’t have to struggle through the paycheck to paycheck cycle.
If you’ve never talked to your kids about money, no worries, you can start now.
And you’d be surprised how interested they are in the topic, especially when they realize that they can grow their money!
But instead of on trees, it’s with wise savings and investment choices, haha.
Here are 5 Basic Money Skills You Should Teach Your Kids:
Money Skill #1- Your Kids Should Know How to Read a Paycheck
It sounds so elementary to us, but I realized my mistake when my then 15 year old asked me what FICA and OASDI was.
Our kids won’t know what the heck these things are without us guiding them through it.
They should also know what net pay versus gross pay is, how they fill out their tax forms and what their taxes are paying for.
Once they earn their first paycheck, they are a contributing citizen to society. They have a right to know how their deductions are being used.
Money Skill #2- Kids Should Know How Much to Save, Spend, Donate
This is the perfect time to go over the percentages of save, spend, donate with your kids. They’re working or earning money, but they have no obligations or bills, so it will be much easier for them to learn good habits from the start.
Our household rule of thumb for our kids is that they save 60%, end 30%, and donate 10%. The first thing that they do is take out their tithes from their pay and set it aside.
Then, they save their 60%, sometimes more, depending on how much they’ll need during that month. And the most they’ll spend is 30%.
Teach them how to budget. It doesn’t have to be elaborate. Even a pen and paper will do.
Save More When You’re Young
My 17-year old daughter actually saves about 80%, spends 10% and donates 10%. She’s learned to be creative to save money on everyday expenses and she lives at home, so she doesn’t have bills.
This works for her, but your child, depending on activities and their hourly rate, may need to keep it at 30%.
The idea here is to teach them the habits, so these tasks become automated in their mind and they learn to save every single month.
Money Skill #3- Kids should learn how to spend within their means
How many times has a kid of yours asked for a toy and or something and said something along the lines of “its only X dollars, mom.”?
The word “only” in that phrase is an indication that they don’t know the value of money as it relates to time worked to earn it.
It’s time they understand how long it takes to earn the money they want for that item.
If your kid is not old enough to work or is not currently working, set a chore price list with chores that are not part of their current responsibility.
As they spend their earned money, remind them how long it took for them to earn enough to buy that item and encourage them to be more mindful of how much they’re spending.
Just like any skill, it needs training to master it.
I take my kids every couple of weeks to Big Lots or the Dollar Tree. During these trips, they bring their own money and choose items based on what they could afford.
I also encourage them to only buy items that they’ve wanted for a few weeks. So, they don’t build the habit of impulse spending.
They’re always excited for our shopping trips because they can buy things. But, I’m also excited to subtly train them to think wisely about their spending habits.
For the first few times, my 12-year old would overspend. So, she’d put an item back. This little act taught her a valuable lesson on how to calculate her purchase before standing in line.
It also taught her to be mindful of always spending within her means.
Money Skill #4- Kids Should Understand Debt and Avoid It
I remember only learning about the implications of debt as I accrued it. Being clueless to how debt could negatively affect my life and I had to learn the hard way.
I want better for my kids. I want them to know that debt should not be a normal part of their lives. Instead, I want them to learn how to use debt properly to access benefits. But, I also want them to be wise and only use credit cards when they actually have enough to cover the expense.
It’s our responsibility to raise awareness with our kids about student loans, car loans, high interest credit card debt.
Debt should never be used to buy something they can’t afford or to pay for impulse purchases that we didn’t budget for.
We can benefit from debt if we use it correctly. But, when we use it to supplement our income, like I did when I was young, it can be very harmful.
Money Skill #5- Kids Should Know How to Grow Money via Investments
I remember having a conversation with my 12-year old about compound interest. Seeing her face light up as she realized that she could actually grow her money (almost like magic) was priceless.
She soon began to ask me tons of questions about investments, what kinds of accounts were good for kids, how long it would take to double her money, and when she could start.
Sparking those talks early with your kids will get them excited about growing their money. They’ll be light years ahead of their peers just by knowing more and asking questions.
If you’re not great with investments, perhaps get a kid friendly investment book that you and your child can read together. You can find many books on this subject at the library for free. Or get an audiobook to listen to in the car!
Here are some books to start with:
- How to Turn $100 into $1,000,000: Earn! Save! Invest!
- The Motley Fool Investment Guide for Teens: 8 Steps to Having More Money Than Your Parents Ever Dreamed Of
- Growing Money: A Complete Investing Guide for Kids
- Go! Stock! Go!: A Stock Market Guide for Enterprising Children and their Curious Parents*
- Blue Chip Kids: What Every Child (and Parent) Should Know About Money, Investing, and the Stock Market
Start the conversation about money with your kids. It is one of the best things you can do for your children. With a little knowledge, our kids can master money growth, and use money in the way it was intended.
They’ll never feel the pinch of not having enough to afford their life. And they’ll never have to go through the stress of debt like so many of us.
Love your children. Teach them about money just as you teach them survival skills.