Screaming For Answers - Helping Kids Make Cents Out Of Money
The school system doesn't teach kids about money. So who does? Normally it's the people closest to them, like their parents or friends. That's great and all, but the problem is most people don't have the time to learn about money. So how do our kids learn about it?
How to teach your kids about money
Help your kids save - Double their money
As a parent you feel a great sense of responsibility. I know I do. So how better to teach kids about the power of interest and savings than to double their money if they 'save' their money by putting it in their piggy bank. When they do, double it in a week or two. Now granted, they'll need to learn that a 100% return is not normal in the real world at some point, but it can be a valuable way of teaching our kids that by saving their money and investing it in their 'Parent Bank' that they can make a whole lot more vs. spending it.
Buy your kids stocks in companies they understand
When my kids were born, I bought them a few shares of Disney stock by opening a custodial account through TD Ameritrade. Nothing crazy, I only bought a couple shares. Not because I particularly like Disney as a company or that I think the shares will perform any better than another stock, but because they know Disney. When you buy a stock you are literally buying a share of a company and I want them to know what that means. My kids own 4/1,503,675,000 of The Walt Disney Company (DIS). It is invaluable to teach them what it means. The look on a kids face when you tell them that they own a part of Disney is priceless. It doesn't have to be Disney though, pick any company that they love and open a custodial account for them and see them light up. Netflix (NFLX), Mattel, Inc. (MAT) or go big and tell them they own a little of the top 500 companies in the US with an S&P 500 fund. They'll eventually have to pay taxes if they earn enough in their account but hey, that's another great lesson about money!
Teach them how to work for money
This one is a bit more obvious, it's putting your kids to work. Likely it means doing some chores around the house.
We talking about child labor? Naw, it's cool if it's your own kid. Just kidding, but not really. ¯\_(ツ)_/¯
If you can teach your kids to work for their money they'll understand the value of money. If you give it to them, they'll never understand what it means to earn a buck the hard way. If you pay them $1 to clean a toilet, it may also be a good lesson for them to learn what they don't want to do the rest of their life.
Financial Freedom Can Be Earned
A good way to teach this is to have them pay you back with their earnings. Particularly, if you've been matching their money and paying them 'interest' and teaching them how to work for money. When you let them pay you to get out of a chore, it's a great way to learn that money can buy them time! Probably the most important lesson a kid can learn about money.
Teach them to invest in their financial education
Find a way to inspire your kid to learn about money. Financial Hipster was created to help people learn about money. If you can't teach it, find resources that will teach your kids about money. There are so many tools out there like this Ultimate Resources For Teaching Kids About Money list. When kids understand money they will have a better financial future.
Frankly...Do anything to teach your kids about money
You'll be doing better than the majority of people if you do anything to teach your kids about money. Too many parents are silent about money talk. Every parent wants the best for their kids. The one thing I learned when teaching low income students back in my teaching days was that an education doesn't mean much if you don't know how to manage your money. So let's teach what matters and set our kids up for a successful financial future so they can invest in what matters.
Here are some bonus tips on how to teach your kids about money.