If you fear your children's lives aren't going to be better than yours, you're not alone.
According to John Pelletier, director of the Center for Financial Literacy at Champlain College in Vermont, only about 30% of public schools teach students financial literacy. Until school is more involved, parents need to take the lead on teaching their kids.
A March 2023 survey showed that 78% of respondents didn't feel confident that their children would have a better life than they've had, while 44% feel their finances are in worse condition than they expected at this stage of their life.
The survey, conducted by the National Opinion Research Center (NORC) at the University of Chicago, with funding from the Wall Street Journal, surveyed 1,019 people to get a read on how Americans feel about their personal finances.
The 78% of Americans who don't feel their children would live a better life than them represents the highest percentage since NORC began asking the same question every few years as part of its General Social Survey in 1990.
While there are high levels of pessimism, that's no reason to not give your kids the best chance at financial success. Here are five ways to help them make the most of their money.
Start your kids' financial education early
Children as young as five have shown the ability to develop a relationship with money, according to a study out of the University of Michigan. Researchers discovered that kids had distinct feelings about spending and saving, which affected their behaviors with their own money.
The researchers also suggest that parents should start talking to their children about money early so they can develop healthy spending habits.
Getting your kids involved in everyday activities like grocery shopping and comparing prices on items is a great way to start their financial literacy education.
For young children, explain how much things cost and let them see how you pay for them. They may begin to realize that things aren't free, and watching you engage with your credit or debit card will get them asking questions.
As your kids get older, if they start earning an allowance, you can use this as an opportunity to teach them about saving.
An effective visual aid, If you use cash as a form of allowance, could be the use of a clear or transparent piggy bank. This will allow children to actually see their savings grow — and watch them shrink as they spend their money.
Open a bank account for your child
Giving your child their own bank account is a great way to give them a sense of ownership and control over their money. And when you teach them about opening an account, making deposits and managing their own savings, they learn invaluable financial lessons that can stick with them for the rest of their lives.
If you want to take things slowly at first, some companies offer debit cards for kids that parents can manage through an app. This lets you deposit money into their accounts and limit where your kids are allowed to spend the money. It can be a safe way for them to learn about earning, spending and saving.
A March 2023 University of Michigan study also shows that teenagers aged 15 to 19 who had savings accounts were more likely to have a savings account, credit card, investments and a home by 22 to 25.
Encourage budgeting skills
A household budget is an important factor in keeping a person's own finances in check. Encouraging your kids to start budgeting as well is a great way to get them on the right track.
By showing your child how they can both spend and save their allowance, they may learn to start considering what they spend their money on more carefully. Help them create a budget based on how much they earn and their savings goal so they can manage their spending.
You can also show your own budget to your child as a real-world example to help them understand how your spending affects the family.
Teach your child about interest
You could go out and buy that big-ticket item your kid's been longing for, or you could turn it into a teachable moment.
By lending them the cash and charging interest if it's not paid back by a certain date — interest doesn't have to be in the form of money, it could be extra chores — you teach your child about the importance of paying back loans on time, otherwise things might cost more than necessary.
This is also a great way to introduce your child to the idea of credit. You can show your kid the types of credit that you have, and how you have to budget to ensure you pay off your debts as well.
Make financial literacy fun
While games like Monopoly and Life can help teach your kids about handling cash, there are other ways to make financial literacy fun.
For instance, if your child expresses particular interest in a brand or a product, you can purchase them a small number of shares in the company. Your child can watch as the stock value rises or falls daily, and decide what they want to do with the investment in the company.
Watching the investments grow or shrink over time can teach them the value and risks of investing even small amounts of money.
Or consider gifting your child a government savings bond. The fact that savings bonds gain interest but can only be redeemed after a certain period of time can teach your child the value of investing — and patience.