Were your parents involved in teaching you about money? I know for many of my friends who are starting to have children, the answer is no. And for many young parents, they want to make sure they teach all of the right financial lessons to their children. As I reflect on my life growing up, I learned how to be successful with money from an early age. I want to share with you some of the best money lessons to teach your kids, so they can be successful with money too.
Not all of the lessons I’ve learned were directly taught to me by my parents. However, I credit them with most of these lessens because they gave me the opportunity to learn and fail with money.
And man have I failed with money…
But from those lessons and failures, I’m proud to say that I think I finally have my financial act together.
8 Best Money Lessons to Teach Your Kids
1. Motivate your children to run a business early in life.
When we lived in Fort Hood, Texas in 2006, my buddy and I ran a very successful mowing business. We would print flyers at the beginning of every spring and deliver them around the neighborhoods. To drum up more business, we would walk door to door and continue adding clients to our schedule. We started earning around $250-$300 a week at the age of 14.
2. Teach your children the basics of running a business.
Although I didn’t realize it at the time, my parents really helped me be successful in running my “business”. They allowed me to use the lawn mower and weed eater to cut other people’s lawns. They kept the lawn mower serviced and made me realize that hard work equated to making money.
3. Open a simple checking or savings account.
When I actually started making some money, I loved the process of depositing it and watching it accumulate. Several times a month, I would deposit my earnings into the bank. This process truly taught me the value of saving money. Looking back and if I was teaching this lesson to my children, I would have demonstrated to them the process of keeping simple accounting books. Understanding what expenses I would need to save for would have helped me plan for future business expenses.
4. Balancing a check book and writing checks.
Although this is starting to become a dated practice, it is still an important lesson for young children to understand. I would argue that children should avoid getting a debit card until they can demonstrate the ability to balance a check book. The important lesson to learn from writing checks is that it requires an understanding of always knowing how much money you have in your account before you make a purchase, thus making purchases more deliberate.
5. Earning compensation, not an allowance.
Earning an allowance can lead children to believe it is an entitlement. Instead, outline a list of chores you want your children to complete to earn compensation. Again, this reinforces the ideology that hard work will lead to making money.
6. Open a Roth IRA for Kids.
If your child has an income, then you can open a Roth IRA for them. You will have to report their income to the IRS but I recommend you personally pay any of the taxes it may generate. This will allow you to teach them about the power of compounding interest and investing. Could you imagine if you started funding your IRA at 12 years old? If you still need to understand how to start or maximize your Roth IRA, signup for my free eBook (below) today.
7. Let them make some financial mistakes.
I have always been the type of person who likes to make large purchases. I’m very good about avoiding small purchases, but my weakness was always the larger items. So, when I was a kid, I would spend entirely too much money on paintball guns and bikes. I would have to save up the money and make a large purchase. But, as I started realizing, I quickly outgrew these larger purchases. It wasn’t a lesson that I really learned until I was 26 years old, but it helped that I could slowly make these realizations over my life.
8. Be the best role model.
Ultimately, be a great role model for your kids and they will learn how to handle their money. If you live above your means, your children will too. But, if you are smart about your money and teach financial life lessons along the way, your children will grow to be best prepared to live a financially fit life.