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Summer break is a great time to begin adding age-appropriate chores to your children’s schedules and, more importantly, to introduce them to some basics around how to earn, save and spend their hard-earned dollars. According to T. Rowe Price’s 11th Annual Parents, Kids & Money Survey, nearly half of parents said they miss opportunities to talk to their kids about money and finances. As parents, you always want the best for your kids, which is why in #PurposefulParentingMonth, our team put together five tips that will help get you started with teaching your kids about financial literacy.

  1. Explain where money comes from – Raise your hand if at some point in your life an adult pointed out to you that money doesn’t grow on trees. While you may have rolled your eyes back then, the phrase successfully drives home the point that in order to have money, some effort is likely involved. Talk openly with your kids about the relationship between work and money. It may require some repeating but you will be pleasantly surprised how sticky the concept becomes once they’ve got it.
  2. Consider giving your kids an allowance – An allowance is a great way to start teaching kids about spending and saving. In our modern world, the concept of delayed gratification can be tough for kids. They don’t even have to watch commercials during their favorite shows anymore! The next time one of your kids wants a new thing, explain to them that they earn an allowance so that they can purchase things for themselves. Sometimes that means waiting a few weeks while they save up enough to make the purchase. Do they want something expensive? Considering offering to split the cost with them so that it feels more attainable to them. This approach helps them develop both their money management and decision-making skills.
  3. Have open discussions about finances – Many people consider conversations about money taboo, especially with their kids. But that approach may condition kids to be uncomfortable about money and make them fearful of facing money challenges. Invite your kids to ask questions about money. Follow up with them on how they’re doing with their own money and make it a topic you discuss early and regularly.
  4. Teach opportunity cost – In basic terms, opportunity cost is what a person sacrifices by choosing one option over another. With kids, helping them understand that if they buy something, they will have to leave the other options behind. For example, say, “If you buy this game, you won’t have enough money to get the candy or go to the pool later today.” Help them lay out the pros and cons of each decision they make and help them to determine on paper what they value most before making a decision.
  5. Make learning fun – When you have open conversations around money (see tip #3) you allow the option to make topics around money fun. Read age-appropriate books about finances with your kids, explore online games that focus on financial concepts, and play board games like Monopoly or the Game of Life on family game night so that you can teach about cause and effect in an entertaining way.

Educating your kids early about money is a real gift. It’s an opportunity to bond with your children over something that will play a huge part in their lives. By instilling good money habits in them at a young age, you will help empower them to understand their finances and ultimately set them up for a successful financial future.

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