Getting these three habits into the regular routine of your children will make a tremendous difference in their financial experiences.

Teaching kids personal finance from a young age

Personal finance isn’t an easy subject. Looking at the amount of debt the average American walks around with, it’s clear that money management is a bit of a struggle for many. Unfortunately, money management isn’t taught in schools. Ironically, it’s one of the most important lessons to learn in life. In this case, it’s important to teach your children the skills and habits of personal finance from a young age. When you teach children while they are young, they’re more likely to carry those habits and effortlessly manage money. Sure, it’s probably not a great idea to begin teaching the differences between stocks and dividends when your child is five, concepts like saving, investing and spending are great to teach.

Spending

Spending money is a natural part of life. As a living member of society, you will spend money. There are monthly expenses to keep the lights on and a roof over your head. There are also expenses like gym memberships, fine dining, and the occasional vacation. Teach children that it’s not a bad thing to spend money once they stay within a budget. A great way to teach the spending concept involves a fun toy they’d like. If your child receives an allowance each month, encourage them to start the month with three goals. One goal involves buying one particular item they’ve always wanted, whether it’s a toy, coloring book or a neat pair of shoes. Pick out the item and encourage them to make sure they have enough money to spend on the item. Make sure they remember to throw in a little extra for tax.

Saving

Within the allowance, there should be one jar that’s set aside for savings. The money that’s kept in savings is not to be spent. It’s important to make sure that whatever money goes into savings always remains there unless there is an absolute emergency. When a child gets into the habit of setting aside money without touching it at a later date, they become more comfortable with the concept of saving. Too many people use their savings as an additional checking account and dip into it whenever they feel like it. As the money grows in their savings jar, help them open an official savings account at a bank and continue to see their money grow. Whether your children use piggy banks, mason jars or official bank accounts, these are great ways to save money at earlier ages.

Investing

Investing is one of the more complex concepts, but it’s totally teachable to the little ones. A creative way to teach your children about investments could involve their favorite companies. Teach them that when a person purchases company stocks, this is an easy way to invest in a company. Whatever the company makes, the investor gets to earn a very small portion. Allow your children to pick out some of their favorite companies like McDonald’s and Disney. Each week, over a meal, you can make it a family practice of looking at the fluctuation of those particular stocks during the week. For many people, the thought of investing seems so complex and intimidating. This simple habit of looking at stocks will help children get the idea of investing in their mind and make investing seem a lot more approachable.

Getting these three habits into the regular routine of your children will make a tremendous difference in their financial experiences. Even if they make financial mistakes down the line, their financial foundation is built on solid ground and will help them get where they’d like to go.