Good money management skills don’t magically appear overnight. Chances are you learned quite a few of your most important money skills in your childhood. Do you remember your first allowance? What about your application for your first credit card? Maybe you didn’t make perfect decisions all the time, but you probably learned a lot.

Along similar lines, your kids should also be learning from experience (with your guidance and supervision, of course), and the earlier, the better. It’s not just common sense. Studies consistently show that adults make better choices if they learn good habits in their youth.

Easier said than done, right? Teaching may not be an exact science, but there are a few simple strategies you can follow to make it easier. Here are a few tips for teaching your child about money.talking to your child about money

1. It’s Never Too Early to Start

We’re not saying your toddler is for a seminar on the Volcker Rule, or even ready to count pennies necessarily. However, she’s plenty ready to start learning social and emotional skills, which are just as important as math skills when it comes to managing money. Every time she has to deal with delayed gratification (waiting her turn for a cookie), making a choice (yellow crayon versus blue crayon) or staying disciplined (being quiet in the theater), she’s building a great foundation for budgeting, too.

2. Cash and Coins Come First

tips talking about moneyThis is an essential tip for younger kids, but it’s also important for anyone handling money for the first time. With the increasing popularity of online baking and even a mobile payment service to swipe credit cards via phone, kids will probably have few, if any, reasons to use cash in their adult life. However, it’s hard for kids to understand how money works without it.

When they literally see money coming and going, ideas like spending and saving will seem more real and tangible for them. Seeing numbers go up and down on a computer screen is no substitute for saving quarters in a jar, or handing over a few dollars for a hot dog.

3. Take Advantage of Teachable Moments

They’re always watching how you handle money, and they’ll learn a lot by your attitude toward it. This is no reason to get self-conscious. It’s actually a great thing! You make simple money management decisions every day, and each one can become a teachable moment.

As far as your child is concerned, you’re already a financial literacy expert.

For example, try making your next trip to the grocery store into a budgeting lesson. Look around the kitchen with your child and work together to make a list of things you need. While you’re at the store, explain what you’re purchasing and why, and let her help you make decisions (with reasonable boundaries, of course). Some children will even be able to understand how a food credit card can help with groceries if explained to them.

4. Give Your Child an Allowance

If your child is too young to have a job but old enough to make her own purchases, give her a reasonable allowance. Many experts believe that this is one the best things you can do to teach your child about money. talking to child about moneyAn allowance gives her an opportunity to practice handling money, setting spending goals, and balancing wants versus needs.

Most of the time, it’s best to let her live with the consequences of her purchases. That way, she’ll quickly learn what her priorities are.

That said, make sure you have a discussion about what her allowance money is for. Is it pocket money for the week? Is she expected to save part of it? It’s also a good idea to help her set spending goals. For example, if she’s got her eye on a new bicycle, help her come up with a savings plan.

5. Open a Bank Account

A savings account is a great way for your child to get real-world banking experience. Your local community bank or credit union may even have a savings program just for kids. If your kid is a teenager, get her a checking account. She will not only get to practice saving; she’ll also get to practice account management skills like making deposits, reading card statements and using a debit card.talking about money to your child

If your child is under 18, you’ll probably be required to cosign to open the account, which means you’ll take full responsibility if problems arise. However, you’ll also be able to monitor your child’s account activity and advise her along the way.

6. Take Advantage of Digital Resources

Chances are, your child’s pretty tech savvy, and you can use this to your advantage. If your kid is always playing with your smartphone or tablet, consider introducing them to a kid-friendly budgeting app. Kids Money, Bank of Mom, and A+ Allowance are just some of the great apps that are out there. Try out free versions when you can, and find one that both you and your child like. Additionally, the Internet is teeming with excellent financial literacy resources. Here are a few sites to get you started:

  • Online Money Games: A list of links to money management games for kids of all ages.
  • MyMoney.gov: The federal government’s collection of resources aimed at children and young adults.

Without question, money management skills are one of the most important things kids need to know to be independent. Don’t worry if they make mistakes. It’s better for them to learn hard lessons now, while you can help them, than to wait for adulthood. Good luck!

Laura Edgar is a senior writer for credit card website NerdWallet.com.

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One Response to “6 Tips for Talking to Your Child About Money”

  1. Too many parents seem to make the mistake of paying for everything for their children and just giving them money when they want it rather than an allowance. It doesn’t give children the opportunity to learn good money habits. Furthermore, parents need to let their children pay for things by direct debit to help them build up their credit, especially in such credit-tight-times.

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