Updated May 29, 2014

Kids and Money: Raising Money-Conscious Kids

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Vaccinations are tough. Battles over vegetables are trying. But few parenting challenges are more daunting than walking through a toy store with a preschooler. To young children, just about every toy is appealing, and the notion that mom or dad can’t give them everything they want is incomprehensible.

And yet, we all hope that by the time they’re 18, our children will be able to not just defer gratification when it comes to the consumer goods they want but also plan a budget, save wisely, and think carefully when taking on debt. Turning your child from a materialist into a money-savvy young adult is a serious undertaking, so start as early as you can.

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Infographic: Money Tips that Grow With Your Children
Infographic: Money Tips that Grow With Your Children © CreditDonkey

At times, money issues are emotionally fraught for parents. They may not want to acknowledge that they just don’t have the extra money to spend on something a child really wants. And it can be easy to get into the habit of buying little gifts just because they make a child happy. However, kids need to know they can’t always have everything they want — or everything their friends have.

As you guide your children in making choices about how to spend their money, talk about your own decision-making processes. Maybe you’ve decided not to go away on vacation this summer so you can save up for a pool. Or maybe you’re refinancing your mortgage to get a better rate or switching credit cards to get rewards for your purchases. Discussing these issues, even with small kids, in simple terms, can help them understand how budgeting and thinking about your financial future affects your family’s day-to-day life. At the very least, you’ll get them used to concepts that will become part of their everyday life when they grow up.

Keep in mind they will be inheriting your personal value system, which you can instill in them now. Be open about your charity donations, savings you put aside for their college, and the times you’ve earned money through hard work. The talks have an added benefit: They can help you stay within your budget and focus on your priorities if you are inspired about passing your financial behavior for the next generation.

Raising Wise Spenders and Savers

As children grow, of course, they become more independent in every respect. A parent’s job becomes equal parts offering guidance and allowing them to make their own mistakes. And mistakes are almost certain to happen—wallets get lost, credit cards get overextended buying trendy clothes, and time is wasted on first jobs that don’t pay as much as they should. The more parents can help make these mistakes into lessons, the better off kids are likely to be. If a 16-year-old suffers a little as he figures out how to keep a positive balance on his debit card, with the help of mom and dad, that’s a whole lot better than going crazy with his first credit card at age 21, when he’s on his own.

Feel like your teenagers won’t listen to you? Connect them with games and resources to that will help them learn about money, such as those available through the Financial Education Clearinghouse and The Mint. You can also look for apps, like KidsBank for the iPhone and iPad, that help children track their own finances.

Guiding a child through figuring out checking accounts and credit cards, navigating an advertising-filled popular culture, and developing a “save first” mentality is no easy task. On the other hand, it can’t possibly be any harder than saying the word “no” approximately 6,000 times while walking through a toy store with a 3-year-old.

For more resources on using credit cards for family expenses, check out http://www.creditdonkey.com/family.html

(Graphic Research by Kelly; Graphic Design by Santosh; Graphic Editing by Maria; Additional Writing by Livia; Editing by Sarah)

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Kelly Teh is a contributing features writer at CreditDonkey, a credit card comparison and financial education website. Our data-driven analysis has been recognized by major news outlets across the country and has helped women make savvy financial and lifestyle decisions. (read more)

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