How to teach your child financial responsibility
If you have a family and live on a budget, then you will need financial planning to build security. As they get older it’s important that you know how to teach your child financial responsibility. It is never too early to teach kids finances because the earlier they start, the better their relationship with money.
First, you teach your kids about money and how it is earned and then saved. Ultimately you want your children to know how to make money work for them, not the other way around. Here are some ways to teach your child financial responsibility.
How do you explain responsibility to a child?
Your child should learn about responsibility from as young as when they’re toddlers, as it encompasses making good choices and being accountable for their actions. As your child gets older you can specify responsibility, for example, ‘If I make £5, I can either spend it on Robux, invest it in a business idea or put it into my savings accounts. Which is a better choice for me?’
Slowly but surely they will understand their actions will determine how their future will look so being more responsible for their actions will mean better outcomes in their future. These kids savings tips should be coupled with setting an example yourself – so if you’re a big spender, you may not be showing your children how to be frugal.
Why is it important to teach your child responsibility?
As mentioned above, teaching your child early on how to be responsible for their financial future means they are less likely to get into debt, make poor life choices and suffer later in life. Knowledge is power, as they say, and there’s nothing quite like financial education to help your child feel more in control.
How to teach your child financial responsibility
Activities to teach kids responsibility should include games and showing rather than telling. We will go through how to help your child understand money in this article.
How to teach a kid to be responsible – open up the talk about money as soon as possible
As soon as children are old enough to understand that money can be exchanged for goods and services, open up the conversation about how one earns money, i.e. through a job, and then saves or invests that money to further their plans in life. My boys are 10 and 11, and for a few years now I have explained that mum and dad work to receive money which helps us save for the future, including buying a house and a car, as well as investing in our family businesses to grow more wealth.
You don’t have to be super detailed about how it works – that can come in time. The importance here is to open up the conversation and make them aware that money doesn’t grow on trees, nor should it be treated as such. Money should be treated as it is, currency to assist us in improving our future.
How to teach your kids about money – teach your child about money through play
A great way to teach kids about how money works is to introduce games like money maths, which will not only teach them about math calculations but also how money is used. Money maths is also a great way to help children understand the value of the pound by learning to what each currency corresponds.
There are lots of great money games around that you could introduce at home. Money manager games like Monopoly* are a wonderful way to teach kids, not only how to work money maths, but how to save and invest their money into property. During a game talk about what it would mean for them to invest in a property in the future and the kind of return, they would expect.
My ten-year-old is already a Monopoly mogul. He saves all his money until he reaches the two most expensive streets on the board, Park Lane and Mayfair, and then he clears us out by investing in houses and hotels. He has learned quite quickly that saving your money and investing it into something that offers a significant return is the way to maximise chances of earning more money in the long term.
How to teach your child about money – introduce kids to budgeting
Part of getting your children on board with financial savings can be making it a family plan to save and invest, and even having a little fun with it at the same time. You could have different weekly activities that involve saving money that you and your spouse can discuss with your children and make different goals you’d like to see them achieve.
But even during their playtime, there are ways to help them learn such as playing games like the ones listed here. Basically, the sooner you start your children on their financial savings journey, the further ahead they’ll be once they reach their mid-high school and college years. The plan is to keep them out of debt and teach them the responsibility of saving and managing their money before it’s too late.
How to teach kids to be responsible – clear savings jars are king
Even in the digital age, you should still emphasise the importance of cash to kids because it lets them know that money doesn’t grow on trees. Financial expert Dave Ramsey recommends getting your child a savings jar when they’re young and allowing them to see the money grow as they save it. He also suggests making sure it’s not free allowance cash but the money they earn from helping around the house and putting in their share of work because, again, the idea is to make sure they know money must be earned. It also makes it less likely they’ll be tempted to go out and spend it.
How to teach kids about finances – look into a child savings account
Another great way to save money is to find a child savings account that offers compound interest on deposits. Let your child come with you to the bank and deposit their hard-earned cash from their jars into a savings account while the bank manager can teach them all about what happens to their money under the responsibility of the bank.
Show them their monthly bank statements so they can see how their money grows. They will enjoy seeing the value of their bank account increase and the euphoric feeling they get knowing that it is all their money they saved.
How to teach finance to kids – get kids used to paying in cash
While it’s important to use your credit card or debit card as needed and eventually teach children about credit scores, you don’t want them to get the idea that credit cards can be used for everything. Using cash at the register when they’re with you helps them learn they should only buy things within their means. Plus having them hand it to the cashier can also be a teaching moment.
Ways to teach your child responsibility – talk about bad loans and the impact they have on their future
There is of course a time and place where personal loans are important such as student loans, mortgages or business loans. But getting into a habit of borrowing money is not advisable. It’s important when teaching your child financial responsibility, you warn them while they’re still young about predatory loans.
Show them how to avoid high-interest loans like car title loans. Loans are only intended for significant financial needs when your income is steady. And credit cards are not meant to be used at their maximum limit.
How to teach kids financial responsibility – find ways for them to make their own money
Encourage your children to think outside of the box and come up with ideas that can help them make and grow money. Discuss important business lessons like identifying a market need. They could come up with something as simple as creating a product or service and selling it on eBay. The idea is to show them making money can be
How to teach your children responsibility – teach them long-term life lessons
Teaching kids about protection like a retirement plan, life insurance for the family and saving energy which is vital in safeguarding the future of the planet can be massive teachable moments to help them grow as adults. Here are seven ways to teach children about saving energy now so they can save money later:
- Before you start teaching children about how to save energy, it is important to make sure they know where energy comes from. It is worth checking to see whether your children know how your home is heated, what the different types of fuels are, and even how your cooker runs. It is also important to explain to children the impact that excessive energy usage can have on the environment – and their money!
- Explain to children that although leaving appliances on standby is an easy option, it is not the best choice for the family finances or for the environment. Leaving appliances on standby rather than switching them off completely could be costing your family as much as £37 per year. Standby is also increasing our energy usage, which is extremely damaging to the environment.
- If you want to take the ‘standby’ message one step further, make a decision with your family to spend one evening a week with no TV, tablets, phones or computers. Try to turn this into some fun family time by playing games, reading books or perhaps even just chatting!
- An easy way for families to save energy and perhaps some money is to replace regular lightbulbs with energy-saving versions. You could even try to see, with the help of your children, whether there are any lights in the home that you could do without or could replace with more energy-efficient alternatives.
- One of the best ways to save money is to have sufficient insulation in your home. A fun way to get children involved in insulating the home is to ask them to make a draught excluder for their bedroom door or for the front door. Controlling the temperature of your home is especially important in the winter months when people have the heating on. Having the heating on at a consistently low temperature would be better for your pocket and for the environment. One way to control the temperature in your home is to ensure that your central heating system uses an energy-efficientpump, such as those available from Pump Sales Direct. Get the children involved in checking and comparing the temperature in different rooms of the house.
- Children are great at coming up with ideas so try holding a family ‘brainstorm’ to see how many ways they can think of saving money in the home.
Financial responsibility for a child is a valuable skill to learn. It will set them up with clear goals for the future and encourage them to plan
FAQ
How do I teach my child financial responsibility?
Check out the tips above which should hopefully give you some insight into talking to your child about financial responsibility.
Should I explain my financial situation to my kids?
You should honestly, but appropriately talk to your kids about your financial situation. For example, if you’re in dire straights, balance honesty with caution. You don’t want to burden your child with adult-sized problems, but pretending things are great when they’re not is also not helpful.
Instead of rattling off all the problems you have with debt, try to explain the situation in a relatable way. You could mention that you’re trying to earn more money to pay for bills or that you’d need to work into the budget the item your child wants to see if you can afford it. Involve the kids in the budget too – a great way to do this is to bring a list to the shops and help your child add up the cost of the grocery list to see if they’ve stuck within the budget. If there’s money to spare, they can get that item they want. If there isn’t, they can’t.
Have you got any tips on how to teach your teenager financial responsibility?
Another question asked was, ‘How do I teach my teen financial responsibility?’
“One way to help teenagers take responsibility for their money is to talk to them about your financial responsibilities. Talk to them about your income and what you need to budget for. This includes bills, shopping, and anything you spend on them, such as school lunches or trips.”
https://www.moneyhelper.org.uk/en/family-and-care/talk-money/how-to-help-teenagers-manage-their-money
As a parent what is the best method to teach kids how to spend money?
“Give them a piggy bank or money box for their own cash.
Talk about why it’s important to keep money safe.
Introduce the idea of saving for something they really want.
Together, regularly count the money they’ve saved.”
https://www.moneyhelper.org.uk/en/family-and-care/talk-money/how-to-talk-to-your-children-about-money
What is the best way to teach your child or children how to be successful and secret on making money and saving? The school system is preparing our children for financial hardship and bad financial decisions
Teaching money management in schools is such an important step in helping kids educate financially. But unless the whole education system changes, I doubt subjects like business management, investing/saving money and getting a mortgage will be gracing our kids’ curriculum anytime soon!
How do I teach myself to better manage my money and financial responsibility?
Check out my article here on ‘Money saving for families‘ for more information on how to better manage your money and financial responsibility.
Is it your responsibility to feed your kids?
Yes absolutely. When you became a parent, you signed up to feed your kids.
At what age should parents disclose their financial details to their kids?
Another question asked was, ‘At what age did you start talking to your kids about personal finances? How did it turn out? What would you recommend for other parents?’
As soon as your kids start to take an interest in money and you think they’re old enough to understand how it works, then they’re old enough to start getting a financial education. There isn’t a set age.
How do you make a child pay for something they want in order to learn responsibility when they don’t have a job?
This is a great question! You can start by using an earnings/reward chart and list basic chores around the house from which they could gain some pocket money/allowance. You can then progress to jobs outside the house and a weekly salary to mimic working in a job environment. Advise them to put a percentage of their money into a savings account and they can spend the rest on what they want.
If you could create a public school curriculum that would teach children and adolescents how to achieve financial success and live the lives of their dreams after they graduate what would it look like?
A great answer to this question can be found here: https://qr.ae/pvMLpm
Besides financially how can parents be most conducive to their children’s education?
You can find an answer to this question here: https://qr.ae/pvMLI2
Do you as a parent feel it’s your responsibility to help your grown children financially if they need it?
I prioritise my kids’ health and well-being over anything, and helping them be responsible adults is one way of becoming well-rounded humans. The more knowledgeable they are, the happier they will be in the long run.
How should I financially prepare for parenthood?
I have a great article here about how to prepare for a new baby which will help!
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