Here are 3 ways to teach your child financial literacy:

1. Give your child an allowance that is designed to cover specific categories of expenses and leave those financial decisions up to your child. Talk about saving, spending and sharing. Chat with your child about her decisions over time and be curious about what she is learning. Refrain from giving advice unless it is requested.
2. Give your child the opportunity to be responsible for some part of your weekly food shopping. Give him a budget and put him in charge of buying fruit for the week or another specific category. Chat about how it went, how much things cost and his thoughts about the process – what he liked about his choices and what he might change next time.
3. Allow your child to pay all your family bills for a month. Show him how much you earn during that time period and how it gets spent and saved. Help your child understand how you make your priorities for spending and saving, talk about your debt and limitations when it comes to money and discuss honestly anything you wish you had done differently.

Where do kids get money? Ideally, your kids are getting money from allowance, gifts, earnings, inheritance, and investments. However, most likely your kids are getting it from what we call “the dole.” You dole it out to them based on pretty unpredictable logic – if you feel in the mood if you happen to have money on hand, if you like what they want, if you approve of their behavior in the moment, etc. What does this teach kids about money? Perhaps that whining works after a while, that getting money depends on how persuasive or charming you can be, or maybe that it is unpredictable and you better get it when you can.

How do you learn about money? A lucky few of us had great role models as parents and we learned from them. Or an even smaller number of us had parents who went out of their way to teach us some skills. If you ask my daughter she will tell you that she learned by doing the opposite of her parents – money was not an important consideration in most of our life planning. That has changed quite a bit over time, thank goodness. But she also had a dad who taught her about compound interest and took her to the bank to open an IRA when she got her first job. You may want to learn more about finances yourself, but you don’t need to be a financial expert to give your children the opportunities to learn and find answers together.

Don’t make your child learn the hard way. Start early and be positive about the subject of money. As you take a careful look at the topic with your child, you might learn something yourself!

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