3 Everyday Events That Can Teach Your Kids About Money

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C4WD2P USA, New Jersey, Jersey City, Mother giving money to teenage daughter (14-15). Image shot 2011. Exact date unknown.  stan
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I believe teaching kids about money is one of the most loving things you can do as a parent.

Americans, especially younger generations, are struggling with financial literacy. The popular Jump$tart personal finance test showed that 63 percent of nearly 6,000 high school students failed their test on financial literacy basics. Living in a society that struggles with credit card debt, student loan debt and an overall lack of fiscal discipline should motivate us as parents to involve our children in money decisions around the home. Simple ways to teach your children about money can be found in everyday activities.

Don't Stop at No

How many times have you been at the store and turned down your children when they ask to buy something? If you're like me, it happens quite often. And it offers a teachable moment.

"Children need to understand Mom and Dad have a valid and thoughtful reason behind the 'no' to help avoid feelings of deprivation" said Shannon Ryan, a certified financial planner, author of numerous books on teaching children about money and founder of The Heavy Purse. "When those feelings of deprivation are not addressed, it can cause children to feel resentful and tell themselves that they will buy whatever they want, whenever they want when they grow up."

This is a great opportunity to point your children to your family goals. Those goals generally take money, and by helping your children see the bigger picture, it can mitigate that feeling of deprivation and excite your children about working as a family to reach these goals.

Save, Spend, Share

Many parents give their children an allowance. I received one as a child and loved it. While it may be fine to reward your children for things they do, an allowance can easily make children feel that they're entitled to receive money for nothing. Last I checked, no one gives us money for nothing.

%VIRTUAL-article-sponsoredlinks%Ryan and her husband defined sets of chores their children need to complete, without pay, as members of the home. To earn money, they can choose other tasks from a weekly job list. That money -- along with any other money they earn or receive -- is allocated according to a save, spend, share plan they've decided on together.

This approach allows children to have a purpose or a goal for their money. They can begin to learn the importance of separating emotions from making financial decisions. This allows children to decide if they truly want a given item and to see the true cost of purchasing an item, saving for a future desire/need or helping someone else. They will also learn how to make money work for them.

Involve Them in Financial Decision Making

Your children are always observing you. They hear what you say, and they see the actions you take -- which often speak louder than your words. This is especially true when it comes to finances. I'm not saying you need to discuss specific dollar amounts, but allow them to be a part of the general decision making. You children will:
  • See how you make financial decisions, which is incredibly important as you begin to teach your children about money.
  • See how financial decisions should be made and what's important to the family.
  • Have part ownership in the overall process.
This does not have to be in sit-down meetings, but can be done in everyday happenings so it occurs naturally. According to Ryan, this can start very with children as young as 3 years old.

We take this approach in my family as we want to help our children see why we make the decisions we do and excite them about our goals, such as where to go for summer vacation

While money may be a taboo topic in your home, it doesn't have to be. Children are much more aware of things than we give them credit for. By avoiding financial discussions they're not only kept in the dark as to what role they play in the family unit, but it also can hinder them as they grow older and begin to make financial decisions of their own. By using these simple steps to start teaching your kids about money you can positively impact their future and the future of their children.

John Schmoll is the founder of Frugal Rules, a finance blog that regularly discusses investing, budgeting, and frugal living. John is a father, husband, and veteran of the financial services industry who's passionate about helping people find freedom through frugality. He also writes about growing your wealth about Sprout Wealth.com.

3 Everyday Events That Can Teach Your Kids About Money
"Your daily habits and routines are the reason you got into this mess," writes Trent Hamm, founder of TheSimpleDollar.com. "Spend some time thinking about how you spend money each day, each week and each month." Do you really need your daily latte? Can you bring your lunch to work instead of buying it four times a week? Ask yourself: What can I change without sacrificing my lifestyle too much? 
Remove all credit cards from your wallet and leave them at home when you go shopping, advises WiseBread contributor Sabah Karimi. “Even if you earn cash back or other rewards with credit card purchases, stop spending with your credit cards until you have your finances under control,” she writes.
If you do a lot of online shopping at one retailer, you may have stored your credit card information on the site to make the checkout process easier. But that also makes it easier to charge items you don't need. So clear that information. "If you’re paying for a recurring service, use a debit card issued from a major credit card service linked to your checking account," Hamm writes.  
Reward yourself when you reach debt payoff goals. "The only way to completely pay off your credit card debt is to keep at it, and to do that, you must keep yourself motivated," Bakke writes. Just make sure to reward yourself within reason. For example, instead of a weeklong vacation, plan a weekend camping trip. "If you aim to reduce your credit card debt from $10,000 to $5,000 in two months," Bakke writes, "give yourself more than a pat on the back." 
“Establish a budget,” writes Money Crashers contributor David Bakke. “If you don't scale back your spending, you'll dig yourself into a deeper hole." You can use personal finance tools like Mint.com, or make your own Excel spreadsheet that includes your monthly income and expenses. Then scrutinize those budget categories to see where you can cut costs.    
Sort your credit card interest rates from highest to lowest, then tackle the card with the highest rate first. "By paying off the balance with the highest interest first, you increase your payment on the credit card with the highest annual percentage rate while continuing to make the minimum payment on the rest of your credit cards," writes Mint.com spokeswoman Hitha Prabhakar.
To make a dent in your debt, you need to pay more than the minimum balance on your credit card statements each month. "Paying the minimum -– usually 2 to 3 percent of the outstanding balance -– only prolongs a debt payoff strategy," Prabhakar writes. "Strengthen your commitment to pay everything off by making weekly, instead of monthly, payments." Or if your minimum payment is $100, try doubling it and paying off $200 or more. 
If you have a high-interest card with a balance that you’re confident you can pay off in a few months, Hamm recommends moving the debt to a card that offers a zero-interest balance transfer. "You’ll need to pay off the debt before the balance transfer expires, or else you’re often hit with a much higher interest rate," he warns. "If you do it carefully, you can save hundreds on interest this way."
Have any birthday gifts or old wedding presents collecting dust in your closet? Look for items you can sell on eBay or Craigslist. "Do some research to make sure you list these items at a fair and reasonable price," Karimi writes. “Take quality photos, and write an attention-grabbing headline and description to sell the item as quickly as possible." Any profits from sales should go toward your debt. 
If you receive a job bonus around the holidays or during the year, allocate that money toward your debt payoff plan. "Avoid the temptation to spend that bonus on a vacation or other luxury purchase," Karimi writes. It’s more important to fix your financial situation than own the latest designer bag.
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