7 Great Tips to Model Healthy Cash Management for Kids

Model Healthy Cash Management

This post is from our partners at GreenPath Financial wellness. If you need help managing your finances, GreenPath’s certified experts can advise you on budgeting, debt repayment options, and more. 

As adults, how we handle finances sends a powerful message to children. That’s why it’s essential to model the healthy cash management behaviors that we want the kids in our lives to adopt.

How to Model Cash Management

Here are seven ideas to help shape children’s attitudes and behaviors around finances. These everyday lessons provide opportunities to model good cash management intentionally.

1. Share the Story of Money in Everyday Life

Even for younger children, aged four or so, everyday activities like shopping or family outings provide a chance to talk about using money. Demonstrate using different forms of money – coins, dollar bills, and credit or debit cards.

Have them consider the things that cost money – toys, groceries, trips to the fast-food restaurant, or admission to the zoo or a water park. Be sure to point out that things that have value may still be free. For instance, helping a neighbor, visiting a playground, or spending time playing with a friend is fun and doesn’t require money.

2. Point Out the Ways Adults Earn Money

Discuss how you or other family members or friends earn money. Guide younger children to consider that the professionals they meet each day are paid an income – such as teachers, bus drivers, mail carriers, and others. Brainstorm with pre-teens or older kids about how they can earn their own spending money by dog walking, yard work, babysitting, or other tasks.

3. Build a Basic Budget for Healthy Cash Management

Age eight or so is a good time to work with kids to build a simple budget, allowing them to plan out their spending for a set time or a special event. Start simple with a written spending plan for the upcoming week.

A budget conversation can include measures for older kids to earn an allowance. For teens, work with them to set up an account with a set monthly amount, where they can withdraw money for gas and incidentals; when it’s gone, it’s gone.

4. Plan out Purchases

For kids of all ages, making a list before going to the store helps reduce impulse decisions. Have your child help list out everything you need before leaving the house. Then when they ask if they can have something else, remind them that it’s not on the list. For older kids, introduce the idea of waiting to buy something they want. Delayed gratification is a complex concept even for most adults. For items on a “wish list,” talk about how much it costs and help them plan for the money required to purchase it.

5. Be a Smart Shopper

When grocery shopping or making larger purchases, help your child locate coupons or sales. Bring children along when comparison shopping so they can understand price differences. Set aside enough time so kids can help you scout out the best prices when buying clothes or preparing for a party. For older kids, read reviews and compare items when online shopping.

6. Model Good Use of Credit

Introduce children to the idea of buying things with credit. For example, let the kids witness you swiping your card at the gas station. Remind them that you’re borrowing money to fill up the tank, and you’ll have to pay back the purchase (possibly plus interest).

When the credit card bill for that purchase arrives, review it with the kids. Highlight the importance of honoring your agreements with the lender by making on-time payments and keeping balances low. For older kids, introduce the topic of a credit score and credit report. Pull up your own history as an example. Teenagers should be aware that a positive credit report will help them in the future.

7. Stress the Habit of Savings

From an early age, teach the importance of setting aside money, whether from earned income or by setting aside a small portion of a child’s birthday or holiday gift, to be used for emergency or a special future purchase. Visit a local bank, credit union, or other financial institution for a kid-specific savings option for caregivers to open in their name. At FFCCU, opening a youth savings account will get your child started on building a sound financial foundation.

Set The Groundwork for Healthy Cash Management

Now that you’ve set an example with your finances, it’s time to help your children achieve their own savings goals. Once your child is five years old and has an FFCCU youth savings account, they join Sparky’s Kids Club — A club filled with financial education activities, coloring contests, and great prizes! It’s a helpful tool to increase financial awareness for kids up to twelve years old. And, if you’re interested in reading more blogs on teaching kids about money, check them out here.