As most parents have learned, kids are great at spending money.  And since they are so good at spending, if parents don’t take the time to teach their children about money and finances, then the children will grow up to be adults who are great at spending.  It is important that parents teach their children about money beginning at a young age and continuing through their teen years.  When parents take the time to teach their children about money, children are much more likely to save as an adult as well as stay out of debt.  So what should parents teach their kids about money?

  1. Live within your means.  When you live within your means, you are not spending more than you earn.  It is so easy to use a credit card to purchase something you really want but can’t afford right now.  Bank loans are available for home improvements, and stores offer incentives for you to apply for their credit cards.  Kids need to learn that credit cards and loans will only lead to debt.  Instead, teach your children to save up for things they want to buy.
  2. You get paid when you work.  Young children see mom and dad get money from the ATM, and it may appear that it is free money.  You simply put a card into the machine, and money comes out.   Kids need to learn that money must be earned; if you don’t work, you don’t get paid.  Parents have varying views on whether to give allowances.  If you decide to give your child an allowance, have them work for it.  They shouldn’t be paid for things like taking out the trash or making their bed – that’s just part of life.  After all, mom and dad don’t get paid for cooking dinner or sweeping the floor.   Allow your kids to earn allowance by doing extra chores around the house, or earn money by setting up a yard sale or lemonade stand.  Don’t forget to teach them to subtract the cost of the lemonade and cups from their profits!
  3. Strive to live debt free.  Credit cards are not your friend – they only lead you further into debt. The only time you should use a credit card is when you have the money to pay your credit card balance, in full, before the end of the month.  Children learn by watching how their parents behave, so parents need to be good role models.
  4. Save and invest early.  Teach your children from a young age to put aside a percentage of their money into savings.  Often times, people start saving for retirement late in life.  When savings are invested as a teenager or a young adult, a nice nest egg will be accumulated by retirement age.
  5. How to put together a budget.  Teenagers and young adults need to learn to properly manage money, and the first step is to put together a budget.  A budget is a plan for your funds and should include all expenses and income.  When children enter into adulthood with the skills needed to develop and keep to a budget, they will be equipped to live within their means.
  6. The difference between needs and wants.  When kids are able to distinguish between needs and wants, they will be more disciplined with their money.  Needs are the things you need to survive such as food and shelter.  Wants are things that go above the basic needs such as a large house, or lots of new clothes.  It is okay to treat yourself with wants but only when your budget determines you have the extra cash to spend.
  7. Be a smart shopper.  Teach children how to research the items they want to buy.  Sometimes it is better to spend more on an item to get better quality.  Over time the item will last longer.  Sites like Amazon, epinions, and consumersearch.com have reviews that can help you make buying decisions.  Kids can also be taught how to shop sales for most any product, as well as how to use coupons and rebates.
  8. How to balance a checkbook.  There is a saying, “Just because you have checks in your checkbook doesn’t mean you have money in the bank.”  Many banks offer checking accounts for teenagers.  This is a great way to give your children hands on experience in managing their money while under your supervision.  Teach them to record every expense and how to keep a running balance.  When the monthly statement comes in the mail, teach your kids how to reconcile their checkbook against the monthly statement.