How to Raise Money-Smart Kids and Grandkids

Did you know that research shows money habits are formed by the age of seven (or potentially even earlier)? Yet 31% of parents say they “never” talk to kids about their money.

To help your kids develop a healthy relationship with money, it’s important to start involving them in conversations about money early. Your children and grandchildren will form habits about money in one way or another – but you have several opportunities to influence those habits and positively inform their money scripts from an early age.

We’ve rounded up our top five tips for raising money-smart kids to help you get started, including tools and methods you can use to encourage saving.

5 Tips for Raising Money-Smart Kids and Grandkids

Raising money-smart kids and grandkids starts with the habits they learn at home, and the conversations you do (or don’t) initiate. To help guide those conversations and help you to impart positive financial habits, we’ve rounded up our top five tips for talking about money with your kids. 

1. Start early

It’s never too early to give your children opportunities to learn about money. 

One great way to introduce financial literacy to youngsters is to give them 3 jars labeled “Spend,” “Save” and “Give.” When they get their allowance, birthday money, etc., they split the money between the jars in a way that they can understand, such as:

  • Spend: They can use this however they want (e.g., candy, toys, movies)
  • Save: Money that is set aside for larger purchases (e.g., bigger toys, bike)
  • Give: Money to give to others (e.g., church, charity)

How you split the money is up to you. In our house, each child decided on a different proportion -one puts a third in each jar, and the other puts 25% in Give, 30% in Save and 45% in Spend. 

jar method

They get to spend and have some fun in the present, save for a bigger project or purchase, and be generous toward others. The jars will give them a visual representation of the progress they are making, but they may graduate to another system (like an app or spreadsheet) as they get older. The best part is that this system doesn’t require huge sums of money – they can participate no matter how much they have! Plus they get some bonus math practice.

No matter how you involve your little ones in financial planning, it’s important to impart the idea that money is a tool for both long- and short-term goals. 

2. Set an example

One of the best ways to impart financial wisdom to your kids and grandkids is to set a good example, whether it’s through generous giving or wise budgeting.

With so many financial transactions happening digitally rather than via check or cash these days, kids rarely get the chance to actually see adults conducting financial transactions -whether it be paying your mortgage or donating money to charities. When it comes to charitable giving, take some time to show your kids how you choose charities, and allow them to be involved in the decisions if possible. 

Or, the next time you’re planning a vacation, provide your kids with a list of pre-approved activities and their estimated costs. Then, give them a budget to work with to plan out the activities of their choice. With a simple list, you’ve involved them in the larger vacation-planning process. 

3. Talk openly about family finances

While setting a good example is important – you can’t rely only on your kids’ observation; you also need to talk to them about money. Let your children know it’s okay to ask you questions about money. Avoiding finances may make them anxious about money or even hyper-focused on it.  

To begin, when you make big money decisions that affect your entire family, involve them in the discussion. For example, choosing where to make charitable donations or creating a family vacation budget. Consider planning regular family meetings to discuss these big topics together as a team. 

You can also use college as a jumping off point for these discussions, especially if your family plan involves your children covering some or all of the tuition costs. Make sure they understand the implications of their decisions and help them make informed decisions on how to pay for college (you can even dedicate a portion of your “Save” jar just for college!).

Related: How to Help Your Kids and/or Grandkids Understand Investing

Pro tip: Some families find certain financial questions taboo – and that’s okay! If your child asks a question you deem inappropriate, ask why they’re curious about the topic – this can help you get to the root of their question. 

4. Let them practice

Whether your kids get an allowance or they have to earn it, it’s a good idea to give them opportunities to practice making decisions (and mistakes) while the stakes are relatively low. The more they can practice money management while they are at home, the better prepared they will be to make responsible money decisions once they move out.

Your kids might eventually grow out of the save/spend/give jar method we mentioned above, but you can keep this type of approach going with apps and debit cards designed for older kids and teens. For example, Greenlight is a financial system set up just for kids, where they receive their own debit card and have opportunities to invest and learn about money – under your supervision. 

If you choose to create a system sans-fancy cards and apps, it can be as simple as having them do chores for money, and requiring that they save a certain percentage of it. 

5. Teach gratitude

You’ve practiced, talked it out, and set an example of money management – but there’s one final, important step: teaching gratitude.

In his book, The Opposite of Spoiled, Ron Lieber drives home the mindset change that comes with gratitude: “There’s no shame in having more or having less, as long as you are grateful for what you have, share it generously with others and spend it wisely.”

There’s a lot of research out there about how practicing gratitude helps us feel more fulfilled, and can thus help us align our values with our money habits. In fact, one report showed that regular gratitude can help deter impulse spending. Money is important, but it’s not the most important thing.

Related: What is the Difference Between a Financial Plan and a Financial LIFE Plan?

There are a few ways you can teach gratitude to your children from a young age, including:

  • Modeling gratitude out loud
    • Something as simple as saying, “I’m so glad we saved up for this vacation – all our hard work paid off!” can have a lasting impact.
  • Making a gratitude jar
    • That’s right – we’re bringing out another jar! Keeping a gratitude jar in your home encourages family members to stop and think about what they’re grateful for, write it down and put it in the jar. Then, you can share your “grateful moments” during family meetings and get-togethers.
  • When you’re done using items, consider donating them
    • Your kids worked hard and saved up to buy their own toys – and that’s great! But eventually, they’ll likely outgrow some of those items. Instead of throwing them away, encourage your kids to pass along the items to friends or via a reputable charity. Emphasize how the gift of donating used items can pass along joy to another person.

Raising money-smart kids and grandkids is a long-term process. With these five tips in your toolbox, you’re on your way to imparting strong money management skills in your children. 

Learn More with Clarity

We can help you talk to your kids about money – and create a plan for your family’s future goals. Click here to connect with a member of the Clarity team today to get started.

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