Presented by Dena Petersen

When working with families, I often hear parents say they wished they had understood money management sooner in life. Think back to how your journey started with personal finance. Did you learn about money management at home, school, or through trial and error? If we can provide our kids with a solid understanding of money management and teach them the importance of budgeting, investing, and saving, we will be giving them the tools to make better financial decisions when they enter the workforce. 

Ultimately, it’s up to each of us to make sure we give our kids the knowledge of personal finance that they need. Fortunately, there are a number of common-sense ways to pass along good financial habits. 

Here are seven tips that can help you teach your kids about money, starting with the steps to take with younger children and progressing through lessons relevant as they move toward adulthood.   

1. Give your child an allowance. Earning an allowance can introduce kids to the value of money and making choices for themselves. Start when your child is little and consider tying at least part of the allowance to chores to help instill a work ethic. 

2. Emphasize savings. Kids are likely to eventually want something that costs more than what they have in their piggy bank or savings account. That’s your chance to teach them how to save and to reinforce the concept of delayed gratification. 

3. Encourage a summer job. A Schwab survey on kids and money shows that when young people have jobs, they are likely to be better savers later in life. You can reinforce the emphasis on savings by making sure your child is saving a bit from every paycheck. 

4. Introduce them to investing. As kids get older and hopefully have some money accumulated, you may decide to open a custodial brokerage account and let them choose some stocks. It’s generally best to work with an advisor to do this, as there may be unique tax considerations. 

5. Teach them about credit. Consider making your child an authorized user on one of your credit cards. There are practical reasons, such as having the card to use in an emergency. But this is also about teaching them how to borrow and spend responsibly. Require them to pay back every dollar they charge, and make sure they understand the basics such as the difference between a credit and a debit card. 

6. Help your child set a budget. When your child is living on their own, during college or after they graduate, talking them through the process of setting a budget will help them better understand how they are spending their money. 

7. Encourage good investing habits. As your child gets older and perhaps has retirement benefits through their job, help them understand their options. When they start putting money into a retirement account, that’s a good time to talk about basic investing principles such as diversification, risk tolerance and staying invested over the long run. 

Give the kids in your life the tools needed to become financially independent from the start. When you show them how you achieve your goals through budgeting, saving, and investing it will give them the confidence to do the same.   

Dena Petersen is a Financial Consultant at Charles Schwab with over 17 years of experience helping clients achieve their financial goals. Some content provided here has been compiled from previously published articles authored by various parties at Schwab.