Only 14 states require teens to take personal finance courses in high school, according to the Council for Economic Education. It falls upon parents to teach children good financial habits before they reach the age of budgeting dilemmas, credit card offers and student loan snafus.

Research has shown that kids develop lifelong financial habits by modeling their parents’ example. Also, experts say taking conscious steps to be a good financial role model is the best way to equip your children for a fiscally sound future.

Teach Them Responsibility

Children’s financial education depends upon mastering more fundamental concepts of responsibility, such as delaying immediate gratification for future rewards, according to a May 2013 University of Cambridge study. A piece in Parents Magazine offers several strategies for teaching kids responsibility such as:

• Verbalize cause-and-effect relationships with statements such as, “Because I spilled the milk, I have to clean the floor.” This helps children connect actions to results.
• Be consistent about enforcing the rules. This reinforces the principle that actions have consequences. Remain calm while they admit to bad behavior this encourages owning up.
• Keep track of your children’s behavior to monitor their learning. Among the options are using a chore chart or developing a reward system.

Connecting Responsibility to Financial Behavior

To connect these responsibility lessons to money, engage your kids in games and activities that teach the connection between working, saving and spending. There are many games and activities online and in stores that  teach basic concepts of spending, sharing and saving. They are available for all ages, for example one game for 8 to 14 year-olds can practice managing money to achieve certain goals and another activity has older kids form into teams for financial  adventures.

Involve Children in Family Financial Activities

Real-time family financial activities also provide teaching opportunities. The Take Our Daughters and Sons to Work Day teaches children where money comes from. The Girl Scouts stress the importance of involving girls in family activities such as budgeting and going to the bank that teach how to save money.

Debt repayment is another important behavior to model for children. For example, if you’re receiving regular structured settlement or annuity payments, you could consider contacting a company to potentially purchase your future payments. You could then use the lump sum of cash to help pay down debt and show your children how that affects your overall credit score.

Teach Kids to Save for What They Want

Kids should also learn how to save for their own financial goals. Let preschoolers pick a toy they can save toward with allowance payments over a reasonably short period. For older children, open up a bank account with no minimum balance or fees.

 

*Written by Andrew Kaufman, who left the financial services industry to run his family’s carpet installation business. Married with three kids, he coaches Little League and blogs for fun.