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- It makes sense to want your kids to do better than you have in life.
- Making sure that your kids are ready to manage their money is an important part of that.
- Teach them about money, saving, credit, and debt early, and lead by example.
Preparing your kids for financial success starts now. If they are in their 20s trying to figure out how to manage their credit or how to buy a house, then it’s too late.
A recent study by First Merchants bank that surveyed 1,000 adult Americans found that more than half aged 18 to 34 did not feel confident managing their personal finances, and 80% believed that better education could have prevented financial related anxiety and stress.
Stacey Tisdale, a financial behavior expert with 20 years of experience teaching people how to be comfortable with money, tells Personal Finance Insider: “So many of us grew up with parents that just paid the bills, but didn’t tell us how they were doing it. It’s important to prepare kids for the financial side of life; they will be dealing with money for the rest of their lives.”
Here are five ways Tisdale says you can make sure your kids grow up to be better off than you are:
1. Talk about money at home
“Money can be such a taboo topic at home,” Tisdale says. “But the only way to get comfortable with money is to talk about money. Explain that money is not some big, bad thing to be scared of, but a tool that you use to create the life that you want. Discuss credit, saving, debt, and having a budget, and the way that money is used in the household.”
2. Involve them in a few financial decisions
Your kids may not pay the electric bill or get involved in whether or not to paint the house next summer, but they can join in on certain day-to-day financial decisions.
“Your kids can definitely make out a grocery list,” Tisdale says. “While at the grocery store, let them get items off the list and see what it costs. If you decide to buy a movie online, let them pick it out and see how much it costs. You have to show kids that money factors into almost every decision in the household.”
3. Start a savings account for them
“This year, when they get holiday money, open up a savings account and discuss it with them,” Tisdale says. “While at the bank, discuss what is happening, and talk about deposit withdrawals and account balances. If you can, open up a college savings account and keep them up to date on how it is growing and what that will mean when it’s time for college.”
4. Get them in the habit of saving and as early as possible
“As a financial expert, I am always telling people to get started saving as early as possible,” Tisdale says. “Well, this is how it starts. Make sure that your kids understand the importance of saving and why. Talk to your kids about having a college savings account instead of student loans, an emergency fund instead of credit card debt, and saving more for a down payment on a home instead of having a higher interest rate. Teach them the benefit of saving money now.”
5. Set an example
“This is the most important thing you can do,” Tisdale says. “If your kids see you managing money well, they will want to as well. If kids grow up with anxiety around money and finances, they will likely experience anxiety around their own finances down the road. Show your kids how to handle money the right way through your own example,” Tisdale states.
