Children often grow up protected from money matters. Their primary responsibilities are to go to school, make friends, and participate in extracurriculars; they don’t need to worry about making next month’s rent payment or how to pay for their lunch. Parents take care of their basic needs, and they can do some chores when they need a little extra money.

Schools do little to prepare children for the financial realities of adult life. Instead, the focus is on learning mathematics and science, with some extras like literature and history thrown into the mix. While some states have begun requiring students to take financial literacy courses before graduation, the practice has yet to become widespread.

As a result, many students graduate from high school or college with little understanding of managing their finances. As children reach adulthood, they experience the realities of what things cost. Often, it’s a huge shock – and they may need to rely on mom and dad for help as they transition.

Since most parents can not rely on the educational system to teach kids about money management, the responsibility falls on them. Here are a few ways to introduce basic budgeting concepts and the benefits of saving to your kids.

1. Introduce Price Comparison Shopping Early

Ideally, you’ll want to introduce children to money concepts in kindergarten. While very young children won’t be able to add or subtract, they should understand that toys, food, and housing cost money. Discuss the different buying options available when you take your kids to the store.

For instance, in the grocery store, you could compare different cereal options and their prices. Point out the price labels and ask your kids to identify the product that costs the most money. Make comparison shopping a regular feature of all shopping trips.

You can turn it into a game, asking them to pick the cheapest products and providing a small reward for their contributions to saving money for the family.

2. Make Your Kids Work for Special Treats and Toys

It’s easy for parents to slip into the habit of buying things for their children whenever they want them. However, if you regularly meet their every need, they never learn the value of what they receive. They don’t understand the work you put into earning money for their needs or how much of your income you spend on them.

Begin teaching children the value of what you provide by requiring them to do chores to earn spending money for their extras, like video games or toys. The tasks should vary depending on their capabilities. For instance, a five-year-old should be able to handle cleaning up their room, while a twelve-year-old can rake the yard or dust the house.

Pay your children for each chore they do. Tell them you won’t buy toys for them, so they’ll need to earn money by performing duties. Tasks help children understand that money comes from doing work. If they don’t work, they won’t have money (or the latest plaything they want).

3. Talk About Your Money With Your Children

Kids often grow up in an atmosphere where parents don’t regularly discuss money with them. Parents handle the expenses independently and discuss issues with their partners, not their children. In some households, discussing adult money problems is a completely taboo topic.

However, you’re doing your children a disservice if you don’t discuss your financial problems. Providing them with examples of how you handle family expenses is a great way to introduce personal finance topics, so it’s not a huge surprise when they become responsible for managing their own.

By the age of 13 or 14, most children should understand the basic concepts of earning money and spending. Sit with them for a few hours one weekend and show them your budget. Tell them how much money you earn each month and what you spend on rent, food, and transportation.

Ask them if they could identify a few ways to save more money each month. Most kids love a challenge, and they’ll appreciate being able to contribute to the family’s financial health with their ideas.

4. Explain How Making a Big Purchase Works

Next time you need to make a big purchase, like find new housing or purchase a car, get your older kids involved. Take them with you when looking for a new home to buy or rent. Ask them for their opinions on each potential purchase.

To make the process even more interesting, add a few purchase options you know are well outside your price range. For instance, you might tour a home with a pool and other features you can’t afford or take a trial drive in the latest high-end BMW model.

Once you finish checking out your potential options, explain the different monthly costs for each alternative. Explain how much you can afford to spend according to your budget, and ask them which choice they think is best.

Checking out houses and cars is an excellent opportunity to show teenagers how mortgages and loans work. Discuss how banks charge interest for their loans and what happens if you fall behind on your payments.

You can also tell them about the additional costs of purchasing a large-ticket item, like insurance. At the end of the process, they should understand the financial concepts of mortgages or leases and how to determine what’s affordable and what’s not.

Giving Kids Money Management Skills Is Essential for Their Well-being

No parent wants to see their children suffer, especially in money matters. Often, the parental instinct is to protect them from problems involving cash and provide them with the same things their friends have.

However, when we fail to teach kids that their needs and wants have a cost, we’re not setting them up for success. Instead, they enter adulthood blinded to the realities of budgeting and financial management. You can better prepare your kids by teaching them the concepts and involving them in your financial decisions.