Parents are constantly teaching their children about money management, whether they’re aware of it or not.
Kids pick up on whether you plan your shopping, put money into savings, or spend irresponsibly.
Teaching money management to children is about setting a good example. You should also take the time to help your children learn how to manage money with specific lessons.
Here are 7 good money management lessons to teach your kids:
1. Start With Physical Change and Notes
With children, physical currency is a great way to learn about money. Whether you teach them to put their coins in a piggy bank or keep paper money in designated envelopes, handling money demonstrates the basics of money management. As kids get older, around ages 9 to 12, they are capable of learning about savings accounts and why they’re important.
2. Teach About Banks
As above, your children can then set aside savings as part of their pocket money to put into an interest making bank account to get into the habit of saving money for later. Older kids can then learn to use facilities like debit cards, for their own money management.
3. Teach Kids About Saving, Sharing, and Spending
Whether allowances are tied to chores is an individual decision for each family. One method that works well is to give kids a flat allowance in exchange for the basics expected of them (like making their beds and feeding household pets), and giving them the opportunity to earn more with bigger chores (like mowing the lawn or handling the family laundry). However you deal with allowances, you should emphasize that saving and sharing are just as important as spending. Kids can set aside money for saving and for charity in separate piggy banks or envelopes if they’re young, while older kids can use a bank account for setting aside portion of their allowance.
4. Help Kids Learn to Comparison Shop
Children in elementary school can understand the basics of comparison shopping. Let kids see you making a shopping list and looking at sales circulars in order to note where certain items cost less. Take your child grocery shopping with you and show how you compare brands to make your money buy more. When your child wants to buy something with her allowance or money she’s been saving, show her how to comparison shop with online sales circulars and by checking store websites for prices, so she can get the most for her money.
5. Encourage Older Kids to Earn Extra Money
Junior school-age kids may not be eligible to get a traditional job, but that doesn’t mean they don’t have opportunities to earn extra money. Here are some ways kids can earn a little extra:
•Organizing and setting up a family garage sale
•Doing gardenin work in summer, and snow shoveling in winter for neighbors
•Doing housework for elderly or infirm neighbours
•Tutoring students who are struggling with academic subjects
•Pet sitting and dog walking
6. Teach Children the Importance of Giving
While earning, saving, and spending are important, so is helping out those less fortunate. Explain to your kids why you give money to charity and encourage them to give some of their allowance or other earnings to the less fortunate. Learn about what your child feels strongly about and show him ways to help. If he loves animals, for instance, help him raise money for a local animal shelter. If he’s especially fond of his grandparents or great grandparents, find out if he can help with your local Meals on Wheels program. Children should understand that giving of their time is an important way to help others when they don’t have a lot of money to donate.
7. Teach Kids About Credit in an Age-Appropriate Way
While your toddler isn’t ready to learn about credit cards and loans, you can still teach her the basics of “credit” with games like “the marshmallow test” that show the value of delayed gratification.
When your older child wants to buy something that’s relatively expensive, tell them they can save up, or borrow the money from you – (even with interest if you’re feeling brave) and a loan due date.
If they fail to pay you back on time, show her the consequences by adding a penalty cost.
Sound money management is one of the most valuable life skills you can teach your children, and starting when they’re young is best.
Demonstrating good money management yourself is extremely important, because kids are so good at absorbing what’s going on around them. Tailor your money management lessons to their age and maturity level, and you will lay a solid foundation for good money management skills once they’re grown and out of the nest.