5 Real-Life Ways to Teach Kids About Responsible Spending

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The Importance of Instilling Good Financial Habits

It’s never too early to teach kids the value of money. Encouraging children to practice basic money-management skills when they are young better prepares them for adulthood and makes them more financially capable. Get started with these five real-life ways to teach kids about responsible spending and set them up for a lifetime of healthy financial habits.

#1: Establish an allowance policy and stick with it.

Each family will have a different take on whether to tie allowance to chores, or whether children should be responsible for keeping the house they live in clean and tidy. Depending on what you decide, it can be helpful to have dollar amounts correlate to chores completed; this teaches kids that money is earned, not just given. When you spend your money, you are cashing in on the effort you made to clean your room, walk the dog, and take out the trash.

Real-life examples help kids realize that money doesn’t grow on trees and it takes real effort to generate income. Decide as a family how you want to structure your allowance policy and commit to that model for at least six months. You can always revisit the policy once you have some historical data to reference.

#2: Involve kids in paying the bills.

It’s never too early to sit down at the kitchen table and go over the household bills. Start with something simple, like the gas or electric bill, and involve your kids in the process of reviewing and paying your utility bill. Then, encourage children to think of ways to improve efficiency throughout your home to both lower your utility bill and decrease your carbon footprint. Sit down together again the next month to see if the changes your family made translated into savings.

Discuss the financial benefits of improving the efficiency of your home and how those savings can be used to pay other household bills. This type of cause-and-effect example shows kids that in most situations, there are ways to cut costs — you just need to get creative. Challenge your family to find additional money-saving practices throughout your home to reinforce the concept.

#3: Discuss your family’s financial habits.

Use age-appropriate terms to discuss the financial plans and habits of your family, including:

  • Savings practices, like committing a percentage of your income to savings
  • Explaining how taxes work and how that affects your overall finances
  • Planning for large or future expenses, like vacations and college
  • Researching the best prices for big purchases, like appliances and cars

Speaking of concepts, like savings and planning, will help reinforce these ideas in your children. The idea is less about the numbers and more about the value of these practices. If you can get your kids to understand how these money habits affect the overall financial health of the family, they’ll be better equipped to tackle these issues as adults.

#4: Set financial goals to which kids can contribute.

One of the fastest ways to teach kids about responsible spending is by setting a financial goal and encouraging your family to contribute to that goal. Whether it’s saving their allowance for a new toy they’ve had their eye on or setting aside some spending money to use while on vacation, establishing a target to work toward instills a sense of ownership.

Empower kids to take ownership of their finances and set up a savings account. Get them involved in the numbers regularly and encourage them to monitor their account activity by explaining deposits, withdrawals, and interest accrued. For a more immediate effect, get a piggy bank to keep at home for loose change and decide as a family how to spend the money.

Despite our best efforts, unforeseen expenses like emergency car repairs can quickly derail the financial plans we’ve so carefully laid.

#5: Model the behavior you wish to see in your children.

You can’t expect your kids to inherently know how to manage their money if you aren’t setting a good example. However, that’s easier said than done. Thankfully, there are simple things you can do each day to demonstrate responsible financial practices:

  • Set a budget and stick to it. Ask your family for help being accountable and honoring the spending limits you’ve set. Look for ways to cut costs and expand your budget with practices like packing your lunch and making coffee at home.
  • Pay for goods and services in cash when possible. Using greenbacks shows kids money is finite and not an unlimited resource. The physical effect of handing over money in exchange for goods has much more of an impact than swiping a credit card. This is a concept that many of us struggle with, especially since we can now pay for goods with just the tap of a button on our smartphones.
  • Encourage price comparison. Demonstrate the importance of shopping around for goods by planning for major purchases. Explain to your kids that different retail stores have varying prices for the same product and some basic research can often save quite a bit of money. Additionally, discuss how things like holiday sales, manufacturer rebates, and coupons can translate to lower prices.

Teaching children responsible spending habits is an ongoing process. Mistakes get made, and plans might need to change, but that doesn’t mean the lessons aren’t making an impact. Whether we like it or not, a very large part of our lives involves money. The good news is that kids are great mimes, so use that habit to your advantage and focus on practicing responsible money habits daily.

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2 thoughts on “5 Real-Life Ways to Teach Kids About Responsible Spending”

  1. Super interesting article! My daughter is about to turn three and we can’t decide if it’s too soon to start teaching her about money. She already says we should buy this and that, so I think we can start! You have some great advice here! I have bookmarked the page for future reference : )


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