There are many tools and resources available to help teach kids about money such as board games and online activities, but the one consistent resource is parents. Four out of ten respondents to a recent survey conducted the National Foundation for Credit Counseling said that they learned financial skills from their parents.
Most kids learn by example. If parents spend money freely, their children are likely to follow in their footsteps and become spendthrifts themselves. While parents may use outside sources to help teach financial skills, it’s important to remember that leading by example will have the strongest impact. Good financial habits encourage healthy financial behavior. Following are some tips on how parents can set the stage as good financial mentors.
Establish a bank account for your child. According to our recent survey about kids and money, three times as many children under the age of 10 now have bank accounts than their parents did at the same age. Maintaining a bank account is a sign of financial independence and maturity. Having a savings account is a good introduction to investing and can help children establish good financial habits.
Relinquish control over finances. Parents have the power to choose the amount and how often their kids receive an allowance. To help teach your kids financial independence, consider allowing children to decide how to spend their money. MMI’s survey found that 49 percent of parents give their children either full or partial control of how they choose to spend allowance. Allowing children to decide how to spend money will establish trust between you and your child and, depending on the age, it gives kids a self-learning experience.
Help kids set financial goals. While you may trust your kids to responsibly handle finances, it is certainly acceptable to also help guide them in the right direction. Sit down with them and help them plan their spending and saving. Teach them to budget for major purchases. When children learn to set financial goals they are better at planning and are less likely to overspend.
Have your own success story. The best way to be a financial mentor is to have a success story of your own. Share examples of positive spending habits with your kids so they can see the big picture of effectively managing money. Set a good example for your kids so they will have a platform for their own financial success.
Finally, parents wear the hat of a role model in many areas of their child’s life. Being a financial mentor shouldn’t be any different.