One of the most important skills we can teach our children is how to handle their finances. Learning how to budget, save and manage money will help create a solid foundation on which they can build their future. But how do you go about sharing these important lessons? This guide will walk you through the key topics and strategies needed to help your children succeed.

Start the conversation

Before your child can learn good habits, they first need to understand what they are. Introduce concepts like savings, allowance, and budgeting through conversation. Talk to them about your own budget, about how saving money somewhere secure can help them afford larger purchases, and about the difference between a “want” and a “need.” These are foundational concepts that will help them understand more complex financial strategies in the future.

But don’t let the conversation stop there – you can also explain where money comes from. Explaining to your child that you work a job that provides you with a paycheck that can then be used to purchase food, housing, and even a few fun items, will help them understand that money doesn’t just materialize out of thin air or out of a parent’s pocket.

Get Started

One of the easiest ways to teach your children about money management is also one of the most familiar – savings. Whether you use a piggy bank, keep track of an “account” within your savings, or take them to open a savings account of their own, teaching a child to put away money for a future time is one of the most important skills they can learn.

Make it fun! Let your child pick out (or make) their own piggy bank or take them on a trip to your local banking center to open a savings account. Many children find doing something grown-up like visiting the bank to be exciting!

Once you have someplace secure to keep their money, work with them on putting a portion of any money they receive in savings. It doesn’t have to be much – even a few pennies or a quarter will help them build the habit. The most important thing is to get them to be consistent.

Once you have someplace secure to keep their money, work with them on putting a portion of any money they receive in savings. It doesn’t have to be much – even a few pennies or a quarter will help them build the habit. The most important thing is to get them to be consistent.

You can even offer incentives if they meet specific savings goals. Make it something small, but still exciting. Offer to take them to a movie, make them a special meal, or buy them a special treat when they hit big savings milestones.

Budgeting Basics

However you go about it, transparency is key. Talk to your child about how much things cost versus how much is in their savings. Help them count their money or check the balance of their savings account regularly and compare it to any goals they have – how much do they need before they can purchase that toy or video game they really want?

Help them build a budget if there are any regular purchases they like to make. Do they like to get a small piece of candy from the grocery store checkout? Do they want to go to a movie with friends? Do they like to get a sweet treat with their daily lunch?

Figuring out how much these things cost, compared to how much your child earns through allowance or chores, can help you teach them the rudiments of building a good budget.

While building a solid budget is an important skill, all work and no play may be discouraging, so make sure you have a category for fun items so that they find the experience rewarding and exciting.

However, they shouldn’t be blowing all their money at the candy store. As an adult, talk to your child about a “want” versus a “need,” and counsel them on spending their money wisely.

Start Earning

In order to learn how to manage money responsibly, children need access to it. Whether that’s a set, weekly allowance, earning money through chores, or some combination of the two, make sure your child has some kind of income. This money can then be used to start savings and to pay for items on their budget. Most importantly, it will teach them the value of money – and how far it goes.

Giving Back

But it’s not all about earning – an often-overlooked financial skill is teaching your children to give back to others. Talk to them about the importance of sharing what they have, and help them find causes they’re passionate about to donate to. This will set them up to become a kind, compassionate individual as well as a financially independent one.

It’s Ok to Make Mistakes

Above all, don’t forget that children are children, and they will make mistakes. Be kind and patient when this happens and walk them through ways they can do better next time. Make sure you’re encouraging, and work to help them find new or better solutions as they get back on their proverbial feet.

Walk the Talk

Most importantly, however, the best way to teach good habits is to model good behavior. Make sure your own finances are in order, that you’re putting money in savings, and that you’re sticking to your budget. These then become teachable moments and informative conversations for your children.

If you’d like to check and see if your budget passes muster, visit your local banking center and talk to one of our knowledgeable bankers.