Teaching children about money from a young age is one of the most important lessons you can give them. Building good financial habits early helps set them up for a lifetime of smart financial decisions, responsibility, and independence. There is not enough taught at school about finance habits, so instilling these habits at home are very important.

Here are some key financial habits to teach your children that will serve them well as they grow.

Saving

One of the first habits to emphasize is the importance of saving. Encouraging your children to set aside a portion of any money they receive, whether from allowances, gifts, or small earnings, helps them understand the value of delayed gratification. This can be reinforced by giving them a physical or digital piggy bank where they can watch their savings grow over time. As they get older, opening a savings account with them can introduce the idea of earning interest and the benefits of banking.

Budgeting

Budgeting is another fundamental skill that can help children learn to manage their money responsibly. Begin by teaching them how to allocate their money between different categories, like saving, spending, and giving. Giving them the freedom to spend a portion of their money while maintaining the discipline to save a part of it teaches them balance. You can also introduce the idea of budgeting for specific goals, such as saving for a toy or a trip, to show them how planning can help achieve larger goals over time.

Prioritize spending

Teaching children the difference between needs and wants is crucial in helping them develop mindful spending habits. Explain that needs, such as food and clothing, are essential, while wants, like toys or video games, are optional extras. Encouraging them to think critically about their purchases can help them make more thoughtful decisions. Over time, they’ll learn how to prioritize their spending based on what’s truly important rather than impulsively buying what appeals in the moment.

Earning money

The value of earning money is another lesson that can have a lasting impact. Children who understand the effort it takes to earn money often appreciate it more. You can instill this by offering age-appropriate chores or small tasks for payment, teaching them that money doesn’t come without effort. This fosters a work ethic and a sense of pride in their earnings, which in turn leads to more responsible financial behavior.

Giving back

In addition to earning and saving, it’s important to teach children about generosity and giving. Whether donating to a cause or helping others, understanding that money can be used to make a positive impact on the world encourages empathy and social responsibility. Set an example by involving them in charitable decisions or giving them a small amount of money to donate as they see fit. This teaches them that money isn’t just for personal use but can also be a tool for good.

Debt

Debt and credit are more advanced concepts, but it’s never too early to start explaining the basics in simple terms. Older children can be introduced to the idea of borrowing, paying back loans, and the consequences of accruing debt. Teaching them that credit is a tool that must be managed wisely helps prevent future financial struggles, like falling into credit card debt. As they mature, you can introduce them to credit scores and how responsible financial behavior can build good credit over time.

Emergency Funds and Preparedness

While this applies more to adults, it is good to teach kids about always having some money reserved for emergencies. You never want to be broke without any spending money available. Also, it is important to plan for the unexpected, from life insurance to protection plans (e.g. Apple Care for your iPhone).

Planning

Encourage open conversations about money. Often, financial matters are treated as private or complicated topics, but talking openly with your children about household budgeting, expenses, and financial decisions helps demystify the subject. Answer their questions honestly and involve them in simple family financial planning. This transparency helps them understand how money works in the real world and builds their confidence in managing it.

Be a role model

Lastly, be a good role model. If kids see their parents wasting money or spending a lot on frivolous things, it is important to realize that kids notice those things. If you overspend and have to cut back on spending to afford necessities until your next paycheck, children may learn those habits, or it normalizes that kind of spending pattern.

By teaching children to save, budget, spend wisely, earn money, give generously, understand credit, and engage in open discussions, you’ll provide them with a solid foundation for financial success. These habits not only help them navigate childhood and adolescence but will serve them well throughout their adult lives, leading to more informed, responsible, and empowered financial decision-making.