To help your kids master essential money skills—and some day break free from you—devote time to financial home schooling. Parents are the biggest influence on their children's financial habits, more so than work experience or financial literacy courses, according to the National Endowment for Financial Education. For ideas on how to do this, see how personal finance and parenting bloggers and authors teach their kids.
1. Tie a "No" Today to a "Yes" Tomorrow
"My wife and I have three children, ages 6, 4, and 2. While they are still a little young for in-depth money lessons, we make a point to involve them in family finances and try to make talking about financial responsibility and independence a part of our daily life. This usually happens in a thousand little, ordinary ways. An instance that comes to mind is when my four-year-old son asked if we could go to a local pizza and games restaurant that he loves. I said no, but went on to explain to him that it costs a lot of money for our family to enjoy an evening there. I reminded him of our vacation in a few months and said we were saving up so that we can have a lot of fun on our trip. It was a good way to teach him about the important principle of delayed gratification and the lesson that sometimes you have to say 'no' to things you want now, to enjoy better things in the future." —John Schmoll, Jr., Frugal Rules
2. Let Them Make Spending Mistakes
"From the time our children were three or four years old, we’ve given them opportunities to earn money by doing chores and projects. When we’re out shopping, they can bring their own money and spend it however they’d like (within reason!). Not only do they learn money management skills, but this helps prevent the 'gimme' attitude. If a child sees something they want and asks if we can buy it, I always respond, 'Do you have enough money for it?' It also gives them the chance to make money mistakes. They’ve learned valuable lessons when they’ve purchased cheap items that broke almost immediately, and we’ve had great discussions on how to make wise purchases. We’d much rather they made $3 mistakes when they are little to hopefully prevent some $3,000 and $30,000 mistakes down the road." — Crystal Paine, MoneySavingMom, author of Say Goodbye to Survival Mode?
3. Show Them That Work is Rewarding
“'I get an M&M mama?' my talkative toddler asks. I reply, 'Yes, if you complete the job.' Even at 2 1/2 years old, I’m attempting to lay financial foundations in my son’s life. At this age, he doesn’t care a thing in the world about real money, but when I break out the M&Ms he knows I mean business. That’s because chocolate is a special treat reserved for a reward. At this stage, candy talks, and I can teach my son about finances with food. He is learning that when he uses the potty, picks up after himself, or helps me with a chore, he is paid for his work in delicious, color-coated chocolate candies. He’s beginning to understand that hard work is rewarded. That’s a trait my parents instilled in me, and I desire to pass along. Cash and chore charts will eventually replace sweets, but until then, candy paychecks are perfectly fine by him. Coins just don’t taste as good." — Kim Anderson, Thrifty Little Mom
4. Break Out the 24-Hour Rule
"I’m blown away that my teenage daughter still remembers going to the flea market together years ago and learning a cool buying lesson from her mom. (As all us moms know, this is a rare and exotic occurrence!) Though I liked a pair of earrings, I waited a day to think it over, knowing that they would likely still be there if I changed my mind. Sure enough, after a day of thinking about it, I realized they weren’t all that special and that I’d rather wait to get something that I loved. To this day, whenever my daughter and I are out shopping and can’t make a decision, we invoke the '24 Hour Rule.'” —Beth Kobliner, author of the forthcoming book Make Your Kid a Money Genius (Even If You’re Not) and a member of the President’s Advisory Council on Financial Capability for Young Americans.
5. Connect Saving, Spending, and Giving From the Outset
"My wife and I have a four-year-old son, and we're just now beginning to teach him the true value of money and how it is a tool to be used for different purposes. We're doing that through the use of three money jars. When he earns money through little jobs we have given him, depending on the day he will put the money in one of three jars. One day for giving, one for saving, and one for spending. On the last day of the week he can choose which jar to put his money in. He can never buy anything unless he has the money available in the spending jar. He also sees importance of saving for the future, and the joy of giving to others. It's truly a joy to see when the ideas of giving and saving start to register, and it's so fun to see the smile on his little face when he's giving to our church, or to a friend through his giving jar. — Peter Anderson, Bible Money Matters
"Our kids are still very young, but at ages 3, 5, and 6 we're doing our best to teach them the importance of spending, saving, and giving. Last summer, we made piggy banks as a family, and each child has three in their bedroom. One for saving, one for spending, and one for donating. Anytime they make money at a lemonade stand or receive birthday money, they split it up equally among their three jars. It's not a huge act, but it does start the process at a young age that it's okay to spend some of your money, as long as you're giving back to others and saving as well." — Anna Luther, My Life and Kids
6. Show Them the Price—and the Path
"We have young kids, but we've started occasionally working with our five-year-old daughter, Kate. One day while shopping with us she discovered My Little Ponies and asked if she could have one. We explained that we were planning on using our money for other things right now (a phrase we prefer to 'we can't afford it'). We shared with her that we would love to help her earn the money to buy it herself. We told her to write down the price and start saving money for it. Over the next couple of weeks we gave her little odd jobs to do around the house to earn the money, quarters and dimes at a time. She worked hard until she'd saved enough. Then we went to the store, and she got to buy her pony. She was so proud. It was a great lesson in money math, delayed gratification, and the power of saving." — Philip Taylor, PT Money
7. Talk About Debt, Too
"My two boys aren't quite old enough for serious money lessons yet, but one thing I'm excited to teach them early on is the importance of smartly managing debt. If they want to buy something on their own, like a toy, they'll have three choices: 1) Buy it now, 2) Save to buy it later, or 3) Borrow money from us. If they choose to borrow, they'll have payment terms and interest just like a regular loan. My hope is that they can learn the consequences of debt, both good and bad, before it has any real-world implications for them and without the lectures and scare tactics. Then they'll have the skills and experience to make smarter choices once they're out on their own." — Matt Becker, Mom and Dad Money
8. Make Them Work for Wants
"A key factor in reaching financial independence is what you spend. Some spending is needed and necessary. But it's the 'wants' that can get people in trouble. Therefore, when our kids ask for a non-essential item, we reply with a two-step plan: 1. First, wait a week. If you still want it, we'll get it then (most times the 'want' goes away by the end of the first day); 2. If you still want it after the week passes, you have to work around the house to earn half of the purchase price—even if you have enough in savings to pay for it. The second step forces them to think if the amount of work required to purchase the item is worth it to them. If they follow through with the required work, then we know that they're serious about the purchase, rather than just expressing a fleeting, short-term desire.Several times the "acquiring of money to pay for the thing" becomes almost exciting as the actual purchase." — Kevin McKinley, On Your Money
More on helping your kids become financially independent:
- 4 Ways to Lighten Your Kid's Debt Load
- 3 Money Skills to Teach Your Teen
- How to Tell Your Kid You're Cutting Him Off Financially
- 4 Ways to Influence How New Grads Handle Money