Seven Ways to Teach Children to Manage Money
As adults, we had a lifetime to learn how to manage our money and spend wisely, but are we teaching our children the same? Finance may seem like an adult concept, but it’s never too early to start teaching your kids about money management.
This post was originally posted on DealNews .
While you will want the lessons to be simple for young children, starting early will help them understand the value of money and the basics of budgeting so that they have these skills as they grow up. Not sure where to start? We have a tip. Here are seven ways to teach kids how to budget and value the dollar so they can start with the right financial situation.
Give your kids money to manage
While a teenager can work during the summer, a young child has no source of income unless you give them benefits. You can link this guide to household chores (showing how adults need to work to make money), give it out for free (to make sure they have money to manage), or some combination of both. Whatever you decide, making sure your child has money of her own is the first step in learning how to manage money.
Keeping money in a transparent bank can help young children as it gives a visual indication of how much they have. However, when they become teenagers, it might be time to trust them with their own bank account.
Teach them the basics of budgeting
When children get their own money, they need to decide how to spend it, and now is the time to talk about savings. Let’s say your child is receiving $ 5 per week but wants to buy a toy for $ 30. While it is not possible to go out and buy a toy right away, your child may be saving money every week and then buying a toy later. This is the essence of a savings account.
Sesame Street offers a simple sentence to teach young children about budgeting and saving. Instead of forcing the children to put all of their allowance in one jar, ask them to split it up into several jars: one for the money they can spend now, one for the money they are saving, and one for charity money (or whatever.) location as you wish). Help steer your kids in the right direction, but let them decide what they want to spend and save on. Congratulations: your kids just made their first budget!
As your kids get older, convert their budget to paper using a budget spreadsheet, either digital or simply stored in a notebook. They should write down how much money they have, where their money comes from and what they spend it on. This means that when they open their own bank accounts, they will already know how to balance the checkbook.
Help the children understand that everything costs money
Your children need to know how much benefit they have compared to the value of the items they would like to buy. When they want a new toy, list the cost and remind them how much they should spend. (This is a good opportunity to encourage children to save money.)
When they buy something with their own money, make the process clear: take the money from your bank, bring it to the store, and give it to the cashier. They will clearly see that the amount of their money will decrease, although in return they will receive a toy (or whatever they want).
When your kids are deciding how to spend their money, also teach them how to prioritize. If they spend all their savings on one thing, they won’t have money for other things they might need. Since they don’t have enough money to buy whatever they want, they need to figure out what matters most to them.
As they get older, you can hold them more financially responsible; for example, teenagers can pay for gas or cell phones on their own. This is where tougher financial decisions come into play. In particular, children must distinguish between what they need and what they need. Your teenager may want a new pair of shoes, but needs enough money to buy gas to get started.
Show them how to shop smartly
While everything costs money, some options are cheaper. Adults try to maximize their budget – from buying generic products to comparing costs – and you can teach your kids to do the same with their benefits.
If your kids are looking to buy a new toy, help them pricing at Target , Toys ”R” Us, and Walmart to see which retailer has the best price. (Or visit Dealnews and find out faster!)
Also talk about sales and coupons , which take patience but can increase your benefit a little. Again, this will help teach your kids to prioritize: would they prefer to pay full price for the item, or wait until it goes on sale and keep themselves some extra money? Your kids will love to have more money and learn how to make the most of their limited budget. This skill will come in handy later.
Let them make decisions (and make mistakes)
Offer advice, but don’t dictate what your kids do with their money; allow them to make their own spending decisions. While they are likely to make mistakes along the way, it’s best to make those mistakes – and learn from them – now rather than later.
Teach your teens about credit cards
While credit cards are a useful financial tool, they can trick you into overspending and leaving you in debt . Explain to your teens how credit cards and interest rates work before they get bombarded with credit card offers. Knowing the potential dangers can help them stay out of credit card debt.
Set a good financial example
Your kids are watching what you do, so stick with the same sound financial habits that you teach them. One way to teach your kids about finance is to involve them in their own financial decisions, which will give them context for the choices they think you are making. For example, if you tell them you can’t afford what they want, then turn around and buy a new TV that sends out mixed signals. But if they know that you are saving up for a new TV that the whole family can enjoy, they are more likely to understand.
Depending on what you think your kids are ready for, you can involve them in some financial decisions, such as what the family should postpone for the next day (new TV or beach vacation).
Readers, how do you teach your children to make smart financial choices? What worked for you? Let us know in the comments below!