How many of us can look back at our childhood and say we wish we learned more about money? Maybe you were even one of those people who graduated college and still had no clue how to manage your money and pay off your debts? Most people gain their money skills and knowledge from their parents and caregivers as they grow and develop. Your children will learn their financial habits from watching you spend, save, borrow, and earn. Although you are the top influencer in their financial life, you don’t have to be a money expert to help them achieve positive and strong financial habits.

According to the Consumer Financial Protection Bureau, there are 3 major building blocks of financial development where skills and behaviors come into focus:

Early childhood:

Developing executive function skills

Middle childhood:

Building financial habits and values

Teen years and young adulthood:

Practicing money skills and decision-making

In order to support each building block as your child develops, there are a few activities to try and conversations to have with them along the way.

Developing executive function skills (ages 3-5):

During this time, children are too young to understand overly complex financial concepts. But, Beth Kobliner, author of the New York Times Best Seller, Get a Financial Life, claims children as young as 3 years old can grasp financial concepts like saving and spending. At this stage, it is best to practice basic skills and attitudes that will serve them well in the future.

Planning and problem solving – Set up easy money dilemmas like, “if you have $2 and you want to buy a pear for .79, how should you pay?” This is also a good time to introduce the idea of having to wait to buy something.

Sort money – Teach your children the difference in money bills and what they represent (their worth).  

Play with money – Instead of just talking about money, pick up a toy money drawer with bills and coins. This can be used around the house to “buy and sell” different items of importance to your child to help them understand the concept of purchasing goods.

Building financial habits and values (ages 6-12):

In the middle childhood stage, your children will begin to pay close attention to the financial world around them. And, although their peers are beginning to influence them, you, the parent, are still their biggest influencer.

Discuss how local businesses are funded – Teach your child about supply and demand and how a business can only be successful if their products or services are needed, otherwise, they will not survive.

Go over your receipts – Discussing things such as sales and discounted purchases can help your child understand different saving methods and why it can be important to wait to buy something they want. This can also be a good time to discuss how buying in bulk can save you money.

Educate your child on the worth of their favorite things – Children tend to think their favorite toys just appear, or that they can have a new one whenever they want. Teaching your child how much something costs and how hard/long you had to work to get it will teach them the value of the things they cherish. 

Practicing money skills and decision-making (ages 13-21):

Teens and young adults are now beginning to make their own financial decisions. Though the amount they spend will be relatively small, these spending habits will be hugely influential to their financial future. Now is the time to open a bank account for your child to teach them about money management.  

Show your children how they can find useful financial information – There are numerous online resources like Khan Academy, BizKids, and MoneyTalks, which will teach your children financial literacy, offer educational lessons, and discussion forums where they can talk with their peers about finances. Ensuring they always have an outlet for information will give them the opportunity to make well-informed financial decisions.

Compare and research different careers – It’s important that children understand what is required to earn specific jobs or salaries.  This way they will know ahead of time the importance of doing well in high school and college in order to have a successful financial life.

Go over pay stub information – At this time your child is probably working and receiving a paycheck. You should take the opportunity to go over their paystub and teach them about things like social security and taxes. The more they understand where their money is going, the better.

Discuss saving for college – Although you may intend to pay for all or most of your child’s undergraduate career, it is crucial that they understand how you will be paying and how you prepared for the payments. Showing them how long it took you to save, how long it will take you to pay off the debt, and how it will affect your financial life will be influential to how they save in the future.

Talk about credit cards – As soon as your child turns 18, they will start receiving endless offers for credit cards, all of which will appeal to their inner spender. It is important that you teach your child about spending money they don’t have, interest rates, and what it’s like to live with credit card debt.

Educating your children about financial wellness and success will take an investment of your time and energy. But, if you don’t want your children to look back and wish they had known more about money like you maybe did, the time and effort will be worth it. Helping your children to develop good financial practices and showing them how to manage their money now will ensure that they are less likely to have money problems and regrets in the future. Isn’t that a future you can look forward to?