Money Lessons for My Daughter

In Ruth’s home, conversations about money happen everyday, and helping her daughter level-up financially comes as naturally as equipping her with essential life skills like cooking! In her latest article, she shares six tips for teaching kids about money.

Learning to handle money is very similar to learning how to cook.

We start young — up on a stool in the kitchen mixing up some basic ingredients or chopping things up for the first time, while our parents anxiously look on. Generally, we make a heck of a mess, are more of a hindrance than a help, but have a lot of fun and learn something along the way. And the next time we clamber up on the stool, we are just a little more knowledgeable than last time.

But becoming proficient enough to learn the skills needed to serve up a palatable dinner, on time, to your family literally takes years of trial, error, learning and practice.

Learning about money is the same! From a very young age and continuing into adulthood, we need years of practice to learn how money works. It’s not enough to just earn money, we need to prepare our kids for dealing with finances in the real world — from credit cards to investing to retirement planning.

A painted rock that says "Always spend less than you earn"

As soon as parents realize that if they can teach a child to produce an edible dinner, then they can also teach their kids about money habits, they’ve won half the battle.

With my daughter, who is now 13, since she was a tiny child, I have spoken a little and often about how we use money in our lives. It’s never too early to start talking to your kids about money, and no question is ever off-limits.

Six tips for teaching your kids about money

  1. Lead by example. I model good money skills and show that I’m in control of our earning and spending. There is no anxiety about money in our home.
  2. Show them your budget. My daughter sees my budget and how I plan our expenses. That includes writing a list before going to the grocery store and setting money aside each week in a sinking fund to save up for a holiday. I take her shopping with me for practical experience.
  3. Engage with data. I share the bits of my PocketSmith dashboard that I know she will find interesting, such as how much we have saved up for her new laptop for school. That gets her interested because she can count down the weeks until we get to buy it!
  4. Pay yourself first. I teach her to save money by telling her that it’s no use giving all of your money away once you have earned it. She understands George S. Clason’s classic quote: “A part of all you earn is yours to keep.” She now saves and invests 50% of any money she receives! Getting your kids a separate bank account or investment account where they can set up automatic transfers for their monthly income can set the foundation for achieving investment returns or savings goals they may have.
  5. The power of compound interest. From a very young age, I’ve shown my daughter how her savings and investments grow over time because of compound interest. If you want to wow your kids, teach them about compound interest!
  6. Enjoy life. I show her that once our immediate, mid and long-term needs are taken care of, we can use the money set aside for spending to go out and enjoy life!

In practice, teaching kids about money management comprises hundreds of small practical lessons and conversations spread over many years. Over time, I’ve seen that my child has learned enough about financial literacy to start making good choices of her own. It’s made her curious to know more. Plus, she is also learning to cook! She is more than capable of baking the most delicious sponge cake for us to enjoy, but whipping up a family dinner, well, she still has some way to go yet.

Teaching my daughter about personal finance has taught me so much. In our home, the conversations continue daily, and eventually (and sadly), she will leave home. But I know that I would have taught her enough to head out into the world and take both her cooking and money skills with her!

Ruth blogs at all about how she and her family handle money. What’s the secret? Spend less than you earn, invest the difference, avoid debt and budget each dollar that flows through your hands. She firmly believes that if you can just get the basics right, life becomes easier from there on in.

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