Empower your kids to make smart financial decisions

Parenting is an all-around job that includes teaching your kid how to make the best financial decisions. These are lessons that will set your kid or teen up for success as they navigate a world in which money impacts so many aspects of life. Think effective budgeting, good spending habits, goal-oriented saving, and smart investing; these are skills you want your kid or teen to grow up with, particularly in today’s increasingly complex financial world.

What are smart financial decisions, and why are they important?

Smart financial decisions are choices you make to achieve your financial goals and secure your future. These are financial literacy skills that you can pass down to your kids to improve their money management.

Smart financial decisions are important at any age because they cultivate healthy financial habits that build confident and responsible individuals who know how to earn, spend, save, and invest their money. This ability to manage money contributes to a secure and stress-free financial future.

Challenges of teaching kids about money

Money is abstract in nature, and kids may find it more difficult to understand things that aren’t as tangible. To help your kid learn about money, consider creating practical exercises that can make the experience less abstract. For example, you can give them “fake” cash for budgeting and buying make-believe things around the house. You can also create hypothetical investments and let them spend their fake cash on these investments so they can conceptualize the idea of risk. Such exercises will give your kid a taste of real-world experience from a young age.

The other challenge of teaching kids about money is that they may not be engaged with certain approaches. One solution to this issue is making the teachings fun and easy to understand. For example, instead of introducing your 7-year-old to individual retirement accounts (IRAs) and compound interest, you can create a game that involves the basic concepts of money management — earning, budgeting, saving, and investing. Greenlight’s Level Up game has everything you need to set kids and teens up with basic financial concepts. 

30 tips to help your kids make smart financial decisions

Being a parent means you have to teach and inform your kid about money and smart financial decisions. As such, you’re the main influence in their financial future. Here are 30 tips that can help you shape that future in a positive way.

1. Start early

Introduce your kid to basic financial concepts when they’re as young as the age of 5. This will give both you and your kid a foundation to build on.

2. Make money tangible

Use physical items like “fake” notes to make the concept of money less abstract and more tangible.

3. Make it visual

Kids are extremely visual, and they’ll find it easier to understand what they can see. Consider using transparent jars and piggy banks to teach them about savings — or keep up with the digital world with balances in Greenlight’s money app for kids and teens.

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4. Start with the basics

Let your initial teachings revolve around basic money management concepts like saving and budgeting. Complex concepts will follow in their teen years.

5. Use academic tools

There are several academic tools that can help you reinforce messages about smart financial decisions. They include apps like Greenlight’s Level Up, websites like Money as You Grow, and TV shows like Biz Kid$.

6. Set goals

This is particularly important because it will teach your kid to work toward a set target when managing their finances.

7. Save real money

Make-believe can be fun, but encourage your kid to also save the real money they earn. This will teach them delayed gratification for the sake of a brighter future. Plus, they may end up funding some of their own large expenses — like a portion of their college tuition — in the future with their savings.

8. Teach about interest

A piggy bank doesn’t earn interest. But you can introduce your kid to the concept by adding parent-paid interest. For example, for every $10 they save, you can add $1 (10%), or any percentage you choose. This can also work as a motivator and reward.

9. Open a joint bank account early on

You can use it to teach your kid how to manage an account and use a debit card under your supervision. Then, you can let them take responsibility for the account when they reach a certain age.

10. Curb excess spending

Help your kid avoid overspending by explaining the difference between wants and needs and the importance of living within your means. This can help them build the financial discipline they need to resist impulse shopping and forgo some unnecessary purchases.

11. Create a budget with your kid

Teach your kid the principles of budgeting using real-life household expenses.

12. Teach them to work for money

You want your kid to learn that money is earned, not handed out. The Greenlight app has chores that your kid or teen can complete for money.

13. Consider tying their allowance to chores

Earning every dollar will teach your kid the value of hard work.

14. Introduce books

You can read books together about making smart financial decisions. As they get older, you can recommend books for them to read independently or have them suggest one for a family book club. This builds reading skills and money skills.

15. Introduce trade-offs

Let your kid choose between two or more things instead of having both. Alongside conserving money, trade-offs can help your kid learn how to weigh their financial options.

16. Involve them in household purchases

Let them see how you make your own financial decisions. This will be a lesson by observation.

17. Share your financial goals with them

As a parent, you’re easily your kid’s first role model. If you have a money-saving or investment goal, you can transmit the same ambition to your kid or teen.

18. Share your thought process

Let your kid know how you make your financial decisions. They’ll understand the logic behind your financial choices.

19. Be transparent when necessary

Particularly with the costs of things like groceries on the rise, let your kid see how prices change so they can grasp the concept of inflation.

20. Use meals as teaching aids

Food is memorable, and your kid is likely to understand a lesson that involves food. Introduce budgets when shopping for groceries and trade-offs when choosing what to eat.

21. Maintain a positive attitude

Your attitude toward money could be influential for your kids. Make sure they understand that communication can help prevent money disagreements.

22. Introduce them to investing

You can use fun games like Level Up to show your kid how investing works.

23. Don’t forget credit management

Good credit management is one of the best financial lessons you can teach your kid. Slowly introduce the different types of credit, including loans and credit cards, and explain how they affect debt and credit profiles (ability to build credit).

24. Know how to say “no”

Don’t be afraid to say “no” to certain expenses — but make sure it comes with love. Your kid will learn that financial decisions come with an opportunity cost.

25. Track spending

Monitor what your kid spends their money on and teach them about prioritizing.

26. Incorporate technology

Today’s financial world is run by tech. Introduce your kid to necessary technology like online banking and banking apps. A good money app like Greenlight can also help your kid or teen learn the essentials of budgeting, saving, and investing.

27. Highlight the benefits of giving

Teach your kid that giving contributes to something bigger than the individual. The Greenlight app has a built-in Giving feature that your kid or teen can use to support a cause they’re passionate about.

28. Recognize and celebrate milestones

Has your kid achieved a savings target? Celebrate. Have they made their first small investment? Celebrate. Recognizing achievements can act as a motivator.

29. Make it fun

Most kids don’t have a long attention span or memory. Use games and activities to make your teachings catchy, fun, and memorable.

30. Keep it going

Financial decision-making never ends, and neither should your teachings. Even through adulthood, you can still help your kid make smart money decisions.

The benefits of smart financial decisions

The best financial decisions come with benefits that a kid can enjoy well into adulthood. Here are some advantages of making smart money decisions.

Improved understanding of economic terms

Learning how to make smart financial decisions usually means reading, consulting, and listening to experts. All these activities help you understand financial jargon and economic terms.

Increased financial literacy skills

Making smart financial decisions often means making the right choices when it comes to earning, spending, budgeting, saving, and investing. In other words, it improves your financial literacy skills.

Better debt management

Part of making smart financial decisions includes proper budgeting and expense monitoring. If you get these two right, you’ll find it a lot easier to manage your debt and ensure long-term financial security.

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The 30 tips above represent 30 different ways of introducing your kid or teen to financial literacy. This is important because it can help them make informed financial decisions when it comes to spending, budgeting, saving, and investing. As a parent, there’s hardly any better way to set your kid or teen up for a healthy financial future. And thanks to the Greenlight app, which provides kid-friendly learning tools, you can make the teaching process fun and easy to understand. Check out the Greenlight app and Learning Center to discover more exciting ways for you and your kid to make better financial decisions.