Setting Kids Up for Financial Success

by Spero Financial

When we think of financial success, we often think about the steps we’ve taken — or the ones we’re planning to take — to make it happen. But did you know that your financial success is closely tied to your family’s financial success?

This fact underscores the importance of teaching your kids how to manage money responsibly. But don’t wait until they get their first jobs to teach them good money habits. Instead, start early and raise your kids with an awareness and understanding of money so they can step into financial independence naturally with confidence.

Give Your Kids a Financial Education

Financial literacy is a stepping stone to financial success. That’s why starting your children’s financial education early is one of the best ways to set them up to win with money.

You can weave money lessons into your daily lives when your kids are as young as three years old. Rather than lecturing them about the importance and value of money, give them hands-on learning experiences that will teach them how to plan ahead, make smart decisions, and handle their money wisely.

From the ages of three to five, let your little ones practice making choices at the grocery store. Whether it’s giving them a small budget of a few dollars or asking them to help choose your weekly groceries, show them what it looks like to choose between various options. Not only will this strengthen their decision-making skills, but it will also teach them the value of the dollar.

Children ages 6 to 13 can be taught how to set and save for financial goals. When they want to make a large purchase, help them set a savings timeline to understand what it takes to save enough money to buy the desired item. They’ll learn how to manage their time and money in order to reach a goal.

Teenagers can learn how to budget their money. Have them list their expenses to determine how much money they should spend each month. Show them your budget and be transparent about any challenges you’ve faced. Being open and honest about money will instill the same mindset in your kids and reassure them that no one has it all together. (And if you’re not following a budget, now is the perfect time to start. Click here for simple budgeting tips.)

Teach the Value of Earning

There are countless opportunities both in and out of your home for your kids to earn their own money. Think of jobs you or a neighbor might pay someone else to do, such as taking care of pets, yard work, or basic cleaning. You can also encourage your children to pursue other money-making opportunities, such as starting a neighborhood lemonade stand or running a yard sale. Whatever method they choose, you can use work as an opportunity to emphasize that earning money takes effort and responsibility.

If you let them do household chores to earn money, implement a structured allowance system where you pay your kids for regularly completing various tasks. Emphasize to your children the importance of consistency and that hard work pays off — literally!

While you’re teaching your kids to earn money, teach them how to save it, too. Encourage them to set goals for items they want to purchase and save a portion of their earnings to reach those goals. When your kids think about things they want to buy, let them spend their money — this will quickly help them distinguish between wants and needs.

As your children grow and become financially independent, gradually give them more control over their finances by letting them make more decisions about spending, saving, and giving. If your kids have grown up learning the value of money, they will give those decisions the careful consideration they deserve.

It’s also important to let your kids know that making money mistakes is okay. While you’re offering them guidance as they grow and learn, part of the process involves making mistakes and learning from them. In fact, poor money decisions often lead to the most impactful lessons. When mistakes happen, discuss the consequences of poor financial decisions and how they can inform choices in the future.

Set an Example of Saving

From teaching your kids how to save their own money to saving some of yours for them, creating a culture of saving in your family is a sure way to set your kids up for financial success.

You can introduce money jars to your kids at a young age. Give them three jars: one for saving, one for spending, and one for giving. Then, let them put money in different jars and teach them to allocate specific amounts to different jars each month. This simple practice will help them see the value of money in a very tangible way.

As a parent, helping your children choose the best savings methods is a critical step. You can start by opening a savings account for them and regularly depositing money into it. As they get older, you can even have them put some of their own money in it each month to familiarize them with making regular deposits into their savings.

Show the Power of Investing

Investing is a powerful tool for setting your children up for financial success. Teaching your kids how to invest and investing for them can give them a financial boost later in life.

Start by teaching your kids the concept of delayed gratification. Choose an item that they really want but will have to work and save for; that way, they don’t quit prematurely. Once your kids understand that instant gratification isn’t always best, they’ll be able to grasp the benefits of investing.

Introduce your kids to investing by helping them choose individual stocks, bonds, mutual funds, commodities, and other investments. While funds needed before retirement don’t get the same tax benefits as a 401(k), they can be used anytime without withdrawal penalties. When choosing between investment opportunities, encourage your kids to invest in companies that produce products or services they know. They’ll be able to understand how corporate results relate to consumer experiences.

While teaching your kids the value of investing, you can also set aside money for them in a certificate of deposit (CD). With a CD, you deposit money up front and let it accrue interest over a set period without making a withdrawal, making it a great way to save money and gain extra money over the CD term. This is a fantastic way to show your children that the sooner you start investing, the more time you’ll have to earn a profit.

At Spero, we’re here to support you and your family on your journey to financial success. Whether you want to open a Minor Savings Account or are looking for support as you and your child step into the world of investing, our team is here to help.

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