What is a money habit? It’s a sustainable, repeatable way to manage some aspects of your money. Whether good or bad, your money habits can say a lot about your financial situation. You can see the results of your patterns in your savings, earnings, and how much you invest.
We pass on our habits to our children. They model their behavior from what we see. Transferring knowledge and skills can be intentional or unintentional – it depends on you.
If you want to set your children up to be successful adults, the most important thing is to help them cope with making good money from an early age. Children are ready to learn from the age of 3. Start with small habits like counting money and work your way up.
There are many tips and tricks to help you achieve this goal as your child moves through each stage of development. Apart from that, some traps to keep your kids away from bad money habits.
In this article, we’ll provide strategies for overcoming excellent and bad money habits and parenting tips you can use to help your kids at any age.
16 Money habits every parent should share with their kids
1. Create a budget
Whether your children have benefits or income from work, they should be encouraged to budget for themselves and set money-saving goals.
So, if your son wants a new toy he doesn’t have enough money to pay for, help him create a budget to save; when enough money is collected, take him shopping and let the cashier pay himself. He will never forget how great it feels about planning for a goal and be rewarded at the end.
2. Ensure cash flow
Your child needs some income to understand income and spending. Give your kids some money as a small allowance and help them manage. If (and when) they misbehave, help them understand the consequences and correct themselves without reprimanding them. It is a learning process.
3. Set up a savings account
1 in 3 Americans has $0 in savings. Only a fraction saved enough to cope with the emergency.
Your savings account is where you save your money instead of spending it. Help kids understand the concept of savings accounts by working out your budget and calculating what it will cost if something doesn’t go as planned.
That’s ultimately what a savings account is for. But you can also make it more interesting by helping them save for something more fun. Visit https://thechildrensisa.com/faqs/ for more information.
One of the easiest ways to save money is to set up auto-transfer. For example, set up your account if you’re trying to save $1,000 in 6 months to buy a new laptop. It will automatically deposit $42 per week into your savings account.
You can teach your child this by helping them set up a checking and savings account. Deposit their funds into a checking account and show them how to schedule an auto-transfer. Tie the savings to a goal, like buying a toy they want, so they understand the concept more tangibly and treat it like a fun game!
5. Use shopping lists
“Mom, I just found this cute dress. It’s perfect, and I love it! Can we have it please?” Does this sound familiar? This age group knows how to take advantage of impulse purchases, especially when using someone else’s money.
Instead of giving up, let your child know they can use their hard-earned commission for this. But encourage your child to wait at least a day before buying anything over $15. It will probably be there tomorrow, and they can make that money decision the next day with a level head.
Instead of shopping without a list and buying things you don’t need right now, please make a list of essential items to shop for and stick to. This simple habit helps you save money and stick to a budget.
Practice this with your kids every time you take them to the store. Get them involved by making a list together. If they’re old enough to do basic math, talk about budgeting for a shopping trip and give them a calculator to work down the cost of each item as you take it.
Making (and sticking to) a list builds impulse control and helps kids understand the importance of a dollar.
6. Buy with cash
Buying with cash creates a concrete connection between the item and its value. Psychologists have studied this concept and proved that when people pay with money, they respect the goods and services received more.
Allowing your kids to fork over extra cash to pay for things can start at a young age and build an understanding of the financial exchange.
7. Track daily expenses
Pay attention to your daily expenses. Use an app or journal to keep a list of every purchase you make for a week – no matter how big or small. Do the same with your children.
If they wonder where their money is going, they can quickly discover the answer to that question in their regular purchases of sodas or video game supplements. Seeing all this helps you visualize your cash flow to fit it into your budget and shopping lists.
8. Identify ‘bad money habits.’
It is also essential to understand that material habits are weak and how to avoid them. Discuss these bad money habits and break them before you start:
- Spending more than you earn
- Depending on the debt to pay the expenses
- Getting payday loans quickly
- Not saving for the future
- Lack of goals
- Thinking negatively
- Blaming others or making excuses
9. Track your spending
Spending money without knowing where it will go is a quick way to slide into financial distress. Keeping a budget and taking inventory of what you consume helps you take charge of your money and stay on track with your goals.
Create a self-checkout process and share it with your children so that money becomes a manageable and understandable concept, not stressful and out of control.
10. Freedom from intention
Even if it’s just a dollar or two a month, saving is an essential mental and financial habit. Spending every penny you earn can start you or your children down a path of scarcity instead of abundance.
What will you do if an emergency or an unexpected opportunity arises and you don’t have enough money to take care of it? Saving isn’t just about troubles; it’s about affordability. You don’t want your kids to miss out or face tragedy simply because they don’t have padding in their budget.
Decide why to save and help your child understand this important concept.
11. Understanding the implications of the loan
In times of need, credit cards can seem like a miracle. The truth is that often they can quickly become a burden and create a financial emergency.
Paying interest on purchases you made months (or years) ago stings. You can help children understand this concept by making math visual.
Now take the price of the toy they want to buy. Calculate how much that toy would cost if paid in cash over a year or two at 19% APR. Please explain the difference: they can either save and buy the toy for less or give some of their own money for the future.
Instead of teaching your kids to rely on credit, teach them to budget and trust money.
12. Achieving the goal
You don’t need to earn much money to manage it well. Good management skills will help in achieving one’s goals. People with better money habits will have a better, more stable quality of life. Tie your child’s new financial habit to a goal, such as buying or doing something they want.
13. Model your tips
If you want your kids to learn good money habits, you must show them in practice. They need to model behaviors transparently and help provide concrete examples that they can work through themselves.
Experience is the best teacher, after all! Remember that children behave like their parents. Be an example. Check your behavior and feelings towards money. Make changes if necessary.
14. Get teenagers involved in household budgeting
Teens lead independent lifestyles, so being financially savvy is especially important for them as mature adults.
As a parent, you are responsible for preparing them for the necessary tasks of managing money. Because teenagers are more mentally mature, they can help them learn and prepare by accessing more complex and realistic information.
It may seem scary, but getting your teen to manage the household budget is an excellent activity for this age group. You can take the following steps:
- Talk to your children about every expense.
- Tell them about the family’s monthly income.
- Browse monthly and annual budgets, plus pay for scholarships and college funds.
- Help your child open bank accounts (checking and saving). If you don’t already have one.
- Discuss your expenses each week and tell them how you are managing them.
- Task your teen with grocery shopping or a list that helps them develop this habit on their own.
- Share research and stories of financially successful people and what you can learn/integrate from their approach.
15. Talk to your kids about investing
It’s a good idea to be aware of the concept of investing in your children as they grow. To show them how money can grow through investments, you can create a small fixed deposit in their name and let them watch it grow.
If you invest, involve your children in the process to help them understand how they can use their earnings as adults.
16. Break bad money habits
If your child has developed bad money habits, you can use this as a learning opportunity. We all make mistakes with money at some point. Going back is part of the process.
Identify the issue and why it is a problem. Talk about how this bad habit will affect them in the future. Ask what they want to do – fix it or move on.
If they want to fix it, make a plan together on how to deal with the problem. Be sure to include steps you can measure. Communicate regularly about how the project is going and measure their success. Note the time when they achieved their goal and did not solve the problem.
If they don’t want to fix it, they may have to let them suffer the consequences of their financial mistakes. Rates in childhood and adolescence are usually lower than in adulthood. Now they learn better than their families from their own families.
But what if you have bad habits? See it as an opportunity. You can learn together and even use it as an example of why it’s important to manage money well. Parents are not perfect!
What better way to show your kids how to do things with humility than to learn and develop these great habits side by side.
Final thoughts on teaching your kids smart money habits
Money is an essential part of life. This is how we get basic needs like food and shelter and indulgences like travel and toys.
Parents and caregivers play an essential role in shaping their children’s habits around money. Managing money is a reality that every adult has to deal with. That’s why it’s better to be more transparent with your children and help them learn money management skills than to let them think, “it grows on trees.”
At any stage, teaching your children about money will take time. It won’t always be easy. But if you want your children to know how to manage their money when they get older successfully, it’s worth taking the time now.
People don’t manage money by accident. If you help your children understand this early, they will have a head start in life. Every parent wants their child to be equipped for a happy, healthy life. Money management is just part of this journey.