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How to Be a Good Financial Role Model for Your Kids

Having children means taking on the responsibility of guiding impressionable little humans through the world. As a parent, it's your job to teach your kids good values and useful life skills — and money management is one of them.

An estimated 58% of Americans have less than $1,000 in savings and 75% live paycheck to paycheck with no safety net whatsoever. If you want your kids to adopt a more responsible approach to money, you'll need to make sure you're a solid role model during their younger years. Here's how.

1. Make savings a priority

It's easy enough for adults and children alike to choose instant gratification over more money in the bank. That's why you, as a parent, must talk up the importance of saving money and explain the benefits it offers, such as the ability to buy the things you really want as opposed to the nonsense items that catch your eye on the fly.

But more than that, be sure to teach your kids to save money before spending it — and model that behavior yourself. If your children get an allowance, encourage them to put a portion of it into the bank (piggy or otherwise) before using it for other purposes. If they get into this habit early on, they'll hopefully uphold it later in life when it becomes even more crucial.

2. Take them shopping

There's no better way to teach kids about the value of money than by showing them how it can be stretched in a real-world application. So take your children with you when you go grocery or clothing shopping and explain the difference between buying a $20 shirt versus a similar one for just $8.

At the same time, don't just load up on sale items. So many adults buy things on sale and in doing so spend more money than necessary. The reason? They purchase items they otherwise would not have bought. Therefore, teach your children that while it's wise to stock up on the cereal they love when it's discounted, loading up on products you rarely use just because they're marked down is the opposite of smart.

3. Learn to say no

The whole notion of money not growing on trees tends to get lost on little ones. One of the best things you can do to be a good financial role model is regularly to say no to your kids' requests for non-essential items, like toys, games, and gadgets.

But don't just say no for the heck of it. Rather, explain you have a limited supply of money and before it can be used to purchase treat items, you need to make sure there's enough of it to pay for things like food, clothing, housing, transportation, and heat. This way, your kids will learn to set their own priorities as they get older. Creating a family budget can also help convey this lesson, especially if you break down your actual bills and show your children how much of your income they take up.

4. Talk about your paycheck

Your earnings shouldn't be a giant mystery to your kids. Once they get a bit older, start sharing details about your paycheck. Show your children what you earn, how much you pay in taxes, what you're setting aside for retirement, and what you have left over to spend. Being open about money will help your children better understand how to manage it later on.

The lessons you teach your kids early on could set the stage for responsible money-related behavior later. And given the number of adults today who are financially fragile, it's an investment worth making.
