Children do what they see and follow examples better than advice. The most important method of instilling good financial sense is transparency in the household finances. Involving children in the financial aspect of running a household is essential for their firm foundation in money management. Fully engage children in financial matters as early as they can speak with these basic methods.
Shopping – Teach children how to shop frugally through clearance racks, sales, discount stores, yard sales, and thrift shopping. Show children the difference between needs and wants, as well as buying only true necessities.
Dining – Provide an example for children with your dining experiences. Use dining out or ordering takeout as a treat or for special occasions. Show children, by example, that living frugally means being self-sufficient when planning and preparing meals.
Utilities – Teach conservation and respect for modern conveniences like running water, air conditioning, heating, internet, and phones. Practing conservation methods will teach children how to conserve power and water. Don’t forget to model home winterization this winter.
Groceries – Show children the differences in cost between buying prepackaged foods and making food with whole ingredients and recipes. Investing in cooking classes and cook books can spark a love of cooking in children and adults. Teach children not only the financial aspect, but also the health benefits of eating whole foods made from bulk ingredients rather than chemical-laden, prepackaged foods.
Gift Giving – Give your children gifts that are both meaningful and useful rather than desires sparked by TV commercials and in-store advertising. Impart a love of gift-giving that considers the recipient, and teach them how to plan for gift purchases throughout the year.
Income – Teaching children to earn their allowance, rather than it being handed freely, helps them understand the value of hard work. Earning an allowance teaches children that the world does not owe them anything, including a living. Help children learn the value of working hard and saving up money through non-personal chores and age-appropriate jobs.
Budgeting – When your children become old enough to handle the mechanics of basic mathematics, then help your children keep their own financial ledgers, set budgets, and create savings plans. Also, plan activities in play scenarios where children figure out the budget for their own play-household. Include expenses such as food, utilities, car expenses, rent or mortgage, and personal needs.
By providing encouragement when it comes to their choices in money management, children will not only learn by example, but also by being encouraged to make the right decisions. Making the right decisions goes beyond money management and into time management. By teaching children to think for themselves, they will develop reasoning skills that will serve them well in the real world, especially when it comes to money.