Teaching Kids About Money
Key Principles and Techniques

Teaching kids about money is harder than we sometimes think. Often, kids don't understand ideas purely because they make sense, sometimes children and teens have to learn the hard way, by experience.

By keeping your child's experiences with money under control to the best of your ability will give you a leg up on his or her financial education. However, this doesn't mean that the best way to teach kids about money is to make sure they don't have any. Effectively teaching kids about money can be achieved by following a general set of principles and using a few handy techniques.

Lead By Example

Obviously, your kids will learn a lot about money simply by watching you and how you handle the family finances. This leaves it strictly in your hands as to whether you will impart good or bad habits on your child, teen, or young adult.

Many parents tend to be very secretive about the family finances, if this is your style, you may want to reconsider at least for the sake of your child’s financial education. Put aside some time on a regular basis to openly discuss your family finances with your kids—teach them about some basic things like income, expenses, budgeting, and taxes.

These can all be covered in a way that relates directly to your own family finances. Many children grow up never understanding the value of money, simply because their parents never explain that the things they enjoy have to be paid for with money, and money has to be earned.

Budgets

When you are teaching kids about money, one of the most important concepts to master is how to create and use a budget. Lack of budgeting skills is a huge contributing factor to the number of people who get deep in debt or declare bankruptcy every year. Creating and living with a realistic budget is the difference between acquiring cash and assets or spiralling downwards into debt, regardless of your income level.

Many kids grow up with the false belief that they have to make a lot of money to be financially secure, when in fact income level makes no difference if a person spends more than they earn. Budgeting teaches kids how to live within their means and put money aside for the future.

Teaching Kids about Debt

Debt is another concept a responsible parent should teach to their child, teen, or young adult. Try to emphasize that debt may sometimes be a useful item in their financial toolbox as long as the loan serves a worthwhile purpose and the borrowed money can be paid back without undue financial stress.

For instance, borrowing money for college might be a good idea as long as you will have the ability to pay off the student loan. The worst thing kids do is take out enormous student loans and then get buried under the constant load of this overwhelming debt.

You must carefully weigh the value of a loan to its cost before you agree to the debt. Sometimes the best course of action is to not take out the loan. You should also thoroughly explain how this is different from consumer debts like those one might accumulate with a credit card.

Tools for Learning

Giving your kid an allowance has long been a tool used by parents to help educate their children about money and saving. One important thing to note when you're dishing out an allowance is that it shouldn't be used as a tool of emotional control, you must keep your child's financial education as the top priority.

You will also need to teach your kids to save money. As they get older you will need to continue this financial education by teaching your teen to save money, things change as they age and so will your training.

More Articles on Teaching Kids About Money

As your child grows into a teenager and seeks to partake adult things you will need to teach them about credit. Our Kids and Credit Cards page will get you and them headed in the right direction.

College is expensive and most students graduate with at least some college loans. You can get a head start on ridding yourself of that burden with our Student Loan Debt Relief article.

Teenagers have their own ideas on how to use money and not many of them entail much foresight. Our Teaching Teens to Save Money page will give you some age specific ideas.

College can be expensive and everyone in the family should look at ways to save money and stay out of debt. Here are some good techniques to help students save money and reduce or eliminate debt while in school.

Once they are off to college most student find it easy to fall into a pattern of credit card spending. Learn why avoiding student credit dard debt is an important job search consideration.