Financial Habits to Teach Your Children

Updated January 20th, 2023 

Reading Time: 7 minutes

Written by: The Zoe Team

While at age 5 you can’t teach your child the value of a 401(k), or what a diversified portfolio means, it doesn’t mean you should disregard teaching them about money. Here are 7 financial habits to teach your children. 

Since we’re young, there are financial habits we can start implementing that may last a lifetime. Do you remember the excitement of breaking your piggy bank open when you were little? Thousands of things crossed our minds when we thought about how we would spend it. The most rewarding aspect of it was the wait. The curiosity. How much is in there? Building up excitement, and waiting just enough to make it all worth it.

Little did we know that this experience was teaching us a life-long lesson of patience, self-reward, and saving!

Have you thought about what good habits have remained from your childhood? For example, have you done your bed every morning since you were a kid? We underestimate the power of simple habits.

In fact, most of the habits we have today, our parents indirectly taught us when we were young. Often, parents disregard financial habits, incorrectly assuming that their young children might not see the value of it. But that’s not entirely true.

Of course, you wouldn’t teach your child investing right off the bat, because they wouldn’t get it. But you can indirectly teach them the value of having their money grow over time! We’ll break down our top 7 financial habits that will help your children better handle their finances.

7 Financial Habits To Teach Your Children

1. It Starts With You

Kids want to be just like their parents. They want to dress like them, talk like them, and work where they work. Our parents are our role models, and growing up, we pick up on the things they do without noticing, both good and bad.

But what if you grow up with parents who have no sense of value over money? Chances are, you won’t have it either.

So before we talk about specific habits you can teach your kids, we need to start with the most important one: How do you treat your wealth when you know your kids are watching?

What good – and what bad – financial habits would they pick up as they grow? Optimize the good ones, and try to slowly let go of/improve the bad ones.

2. Savings

One of the things people struggle with the most is handling savings. At all ages, the habit of saving will always be fundamental.

If your kids have an allowance, open up a savings account for them and contribute a small part of their allowance every week to this account. As the money grows, show them the bank account and how much they have managed to save on their own by making a small sacrifice every week.

As time goes by, have them deduct the money themselves, instead of doing it for them. Chances are, with time, they will start to develop a savings mentality that they will need to nurture as they grow older.

3. The difference between what you need and what you want

At a young age, you can’t expect kids to be realistic. They want to go to space and own a pony. As they grow older, they begin to understand the things they need, especially when they’re handling their own money.

An exercise you can do for this is to take them shopping for “basic necessities.” Clothing for the new school year, supplies, etc. Put a money limit on what you’re gonna spend, and work with them to handle the limit. They’ll probably see a few things they want but don’t need. Teach them how to check off the necessities first, and then spend whatever they have left on the extras.

They will start to get used to spending on fundamental things and then think about the luxuries. Sometimes they will have more money left for luxuries, sometimes won’t. The important thing here is differentiating between “the needs” and “the wants.”

4. Budgeting

The best way to teach your kids budgeting is through their allowance. If you do give your kids an allowance, you’re probably picking a random number weekly and sticking to it. A good practice here is to show them where that number came from. Or even better, work with them to arrive at a specific number you’re both okay with.

Sit down with them and talk through what they need to spend on. Show them the breakdown of how they should be spending their allowance. As they grow older, more expenses will likely come up for them. When that happens, sit with them again and re-adjust the budget. This will teach them to adapt their money to their needs.

5. Working Towards a Goal

As we covered earlier, one of the best parts of opening up a piggy bank is the wait. Over time you have probably learned that sometimes, good things take time. That’s why we wait for a birthday or Christmas to ask for presents. We can’t have everything we want at any given point in time.

6. Money Earning Opportunities

The classic lemonade stand strategy. Your parents would give you money to set up a lemonade stand and give you a shot at earning your own money. Maybe you even had parents who requested you pay them back your expenses.

Throughout their lives, kids will find themselves making money and covering costs. Learning this from an early age is key. As a parent, the best thing you can do is support them, fund their lemonade stand, and teach them how to handle their earnings and costs. There’s nothing better than going to bed after a busy day of selling lemonade and knowing you earned your money!

7. The Value of Giving

Last but not least, this is one of the most important values to keep in mind! Instead of spending your money, you’re giving it to support and benefit something you believe in. When taught early on, the feeling of giving never gets old.

Whether it’s giving away clothes they outgrow, gifting the toys they don’t use, or donating to a Christmas charity drive, teach them the value of giving. Doing so will teach your kids the rewarding feeling that they are doing good, and it will get them in the habit of maintaining the practice.

“Old Financial Habits Die Hard”

While at age 5 you can’t teach your child the value of a 401(k), or what a diversified portfolio means, it doesn’t mean you should disregard teaching them about money. The habits you develop when you’re a kid can stay with you forever. Small things can become lifelong lessons. Small financial habits will have a strong positive impact on your kids’ life.

Think of the day-to-day habits you wish you had started years ago, and still find hard to catch on to. Organization, waking up early, exercising. It’s completely natural for it to be hard to implement certain habits in your daily life as you get older.

The most important thing you should do as a parent is to learn from yourself. The things you wish you had known when you were young, and the things you wish you would have started earlier. Give a good example to your children, live up to the role model job, and most importantly, always nurture the habits that will have a positive impact on their future. Especially when it comes to their finances.

Disclosure: This blog is not investment advice and should not be relied on for such advice or as a substitute for consultation with professional accounting, tax, legal or financial advisors. The observations of industry trends should not be read as recommendations for stocks or sectors.

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