"It's Complicated" When it Comes to Your Relationship With Money

How to Create and Teach Healthy Money Habits at a Very Young Age

byAnde Frazier


May 19, 2019 .4 min read

The rewards of having a family are priceless.

But the costs associated with having a family are very real and can add up quickly. So how can you better prepare ourselves for these costs?

It all starts with your current relationship status with money.

How healthy or strong is your relationship with money? Are you confident about your money habits?

Today, if you take steps towards creating a financially sound plan, not only does this generate security but this also creates peace of mind knowing that your family will have the necessary financial support as they grow, therefore, fostering a healthy relationship with your finances.

With that, it’s important that we allow our children to develop and form a healthy relationship with money as well. Knowing the importance of money and understanding how to handle it at a young age is imperative.

So, if we take the opportunity to teach such a crucial life skill at an early age, not only do we allow our kids to be more financially confident but we encourage the opportunity to develop healthier money management skills.

And all this can be done with a simple conversation.

Here’s how:

During Their Childhood

Lesson 1: Learn to Handle an Allowance

Decide what approach to take and how much to give your children based on your values and family budget.

Lesson 2: Open a Bank Account

Many banks have programs that provide activities and incentives designed to help children learn financial basics.

Lesson 3: Set and Save for Financial Goals

Get your children excited about setting and saving for financial goals instead of buying a new video game with some of these tips:

  • Let your children set his or her own goals (within reason) to give them the incentive to save.
  • Write down each goal and the amount that must be saved each day, week, or month to reach it.
  • Tape pictures of items your children want to a goal chart, bank, or jar.

Lesson 4: Become a Smart Consumer

Commercials. Peer pressure. The mall. Children are constantly tempted to spend money but aren’t born with the ability to spend it wisely. Here are a few things you can do to help:

  • Set aside one day a month to take your children shopping and let them save up to buy one item they really want.
  • Just say no. You can teach your children to think carefully about purchases by explaining that you will not buy them something every time you go shopping.
  • Show your children how to compare items based on price and quality.

During Their Teenage Years

Lesson 1: Handling Earnings From a Job

Encourage your teen(s) to get a part-time job to earn money for expenses and begin taking financial responsibility. Here are some things you might want to discuss when they begin working:

  • Agree on what your children’s pay should be used for.
  • Talk to your teen(s) about taxes.
  • Introduce your teen(s) to the concept of paying yourself first.

Lesson 2: Develop a Budget

Your ultimate goal is to teach your teen(s) how to achieve a balance between money coming in and money going out. To develop a spending plan, have your teen(s):

  • Create a list of all sources of income.
  • Make a list of regular expenses.
  • Subtract the expenses from their income.

If the result shows that they won’t have enough income to meet their expenses, you’ll need to help them come up with a plan for making up the shortfall.

Lesson 3: Save for the Future

Here are some ways you can encourage your teen(s) to save for the future:

  • Motivate your children by offering to match what they save towards a long-term goal.
  • Praise them for showing responsibility when they reach a financial goal.
  • Open up a savings account for your children.
  • Introduce them to the basics of investing by opening an investment account for them (if your teen is a minor, this will be a custodial account). Investing involves risk, including loss of value.

Lesson 4: Use Credit Wisely

Although most major credit card companies require an adult to cosign a credit card agreement before they will issue a card to someone under the age of 18, you can’t ignore the credit card issue.

If you decide to cosign a credit card application, make sure you discuss the following with your teen before he or she uses it:

  • Set limits on what the card can be used for (e.g., emergencies, clothing).
  • Review the credit card agreement, and make sure your children understand how much interest will accrue on the unpaid balance, what the grace period is, and what fees will be charged.
  • Agree on how the bill will be paid, and what will happen if your children can’t pay the bill.
  • You may want to start with a prepaid spending card; it looks like a credit card but works more like a prepaid phone card.

During Their College Years

Lesson 1: Budgeting 101

Once your children have made it to college, they may need to draft a “real world" budget. Here are some ways you can help them plan and stick to a realistic budget:

  • Help them figure out what income they will have and when the funds will be available.
  • Determine together how you and your children will split the responsibility for expenses.
  • Acknowledge that college isn’t all about studying, but explain that splurging this week will mean scrimping next week.
  • Encourage your children to plan ahead for big expenses.

Lesson 2: Open a Bank Account

For the sake of convenience, your teen(s) may want to open a checking account near the college; doing so may reduce transaction fees. Ideally, a student checking account should require no minimum balance and allow unlimited free checking. If you can’t find that, look for an account with:

  • A simple fee structure
  • ATM or debit card access to the account
  • Online or telephone access to account information
  • Overdraft protection

Lesson 3: Getting Credit

As soon as your children arrive on campus, they will be deluged with credit card offers. Here are some tips to help your children avoid getting into trouble with credit card debt:

  • Advise your children to get a credit card with a low limit to keep balances down.
  • Teach your children to review each credit card bill and make the payment by the due date.
  • Remind your children that life after college often involves a student loan, car loan, and even mortgage payments, so the less debt they graduate with, the better off they will be.

So, how strong is your relationship with money? How confident are you in your money habits? And are you allowing your children to develop a healthy relationship as well?

Educate your children about money and help them to establish healthy financial habits that they will carry with them throughout their lives. One day, they may even thank you for it!