One of the stats that always blows the minds of the Her First $100K community is that our money mindset is formed by age seven. When we think of what elementary-aged kids are taught, we think of addition and subtraction or discovering their favorite books. We don’t think about little kids already forming opinions about spending and saving, right? But with that knowledge, it’s crucial to begin teaching children about personal finance early so they don’t become adults who need to unlearn toxic beliefs about money.
While I’m not necessarily recommending you sit down with your toddler to teach them about the stock market (if you do, more props to you!), I am recommending that you begin teaching kids healthy money habits so that they can grow up to have a healthy relationship with money. My parents taught me the value of working and saving money at an early age, which was monumental in me saving my first $100K at age 25.
If you follow these five simple steps, your kids will also learn how to be smart with money.
Lead by Example
You have to practice what you preach, right? I know that’s kind of cliché, but it’s really true in this context. You can’t teach your kids to save money when they only see you spending it. It’s difficult to show the importance of hard work if they don’t get the chance to see you work.
For every trip you take to the ATM with your kid, show them that you also transfer money to your savings account. Bring them to work with you if you can or do chores around the house together.
Set Savings Goals
Don’t underestimate the power of a good piggy bank! Start teaching them about saving young. When they get money for their birthday or another holiday, have them save a portion of it. It’s important to show them the value of saving even if that means having them save up for something they want to buy themselves one day.
One time as a kid, I wanted desperately to see Annie. My parents told me I had to pay for it myself, so I was determined to save up the money for tickets. I was little, so of course my parents helped pay for the tickets, but I didn’t know that would happen at the time. It taught me how to be self-sufficient and that if I wanted something, I needed to work for it.
Give Them a Job
If you want to instill a good work ethic in your child then give them a job. Legally, they might not be able to work at the local restaurant or mall, but they can be given jobs around the house. Some parents feel like giving their children an allowance if they complete their chores is helpful. Others might prefer to have them do one-off tasks like shoveling snow or helping clean the gutters.
Find something that works for your family and make it fun!
Teach Budgeting Skills
I encourage my community to have money dates with themselves or their families. It gives you a set time to look at your spending patterns and see if you’re sticking to the budget. Don’t be afraid to include your kids in this! Show them how you have a certain budget for groceries and then the next time you go to the supermarket, let them help you find food that’s affordable and on sale.
Also, tell them no when necessary. When you do, explain that it’s not in the budget. This will reinforce that just because you have the money, that doesn’t mean you need to spend the money.
Open an Investment Account
There are multiple investment accounts you can open for your child. Roth IRAS, 529 College Savings Accounts, or custodial accounts are all great options. You can invest money on your child’s behalf that they will have access to when they’re an adult. This is a great way to build wealth for them because they’ll receive compound interest on the investments.
Teaching kids how to spend smart, save, and invest is how they develop a healthy money mindset. It’s a major way parents can take care of their kids. Money is a great tool when it comes to taking care of our loved ones, which is why I recommend Ladder to my family and friends. Having life insurance helps to ensure that your family will be taken care of if the worst-case scenario comes to pass. I can’t think of a better way to use your money than to care for your kids.