Teaching children about money early in life is a great idea. It’s a life skill they always need and the sooner they understand the value of money the sooner they’ll use it wisely.
Here are a few tips that can use to help your kids form good money habits.
Let Them See What They Save
Instead of using a traditional piggy bank, choose a clear jar. Your child will literally see their money grow as they save.
Some parents set up three jars – one for saving, one for spending, and one for giving. Let your child choose the organization of their choice and handle the donation.
Show You’re Responsible
We live in a credit/debit world, so kids need to understand that when you use a card, you’re still spending money. Teach them about how money comes out of your bank account when you use an ATM and how purchases on a credit card accumulate.
Explain how you determine when buying with a credit card is wise, and when it isn’t and how interest can grow quickly. If you do use credit, keep your receipts, show them how to match them to your monthly credit card bill, and pay off the balance fully.
Take Them Shopping
Your son or daughter has a jar brimming with money they’ve saved, but it doesn’t mean anything to them until they understand what it can buy. Allow them to take out $5 and go to a few stores.
Let them shop to their heart’s content, but remind them they must stick to their $5 limit. Point out when the price difference from one store to the next for the same item. When they find something they want at a good price, let them hand the money to the cashier and accept any change.
Teach Them To Earn
Children need to understand that the world doesn’t normally hand out money freely. People work and earn their pay.
Pay your children a commission for chores they do around the home, and encourage creative ways to earn extra money. Collecting bottles, cutting other people’s lawns, or delivering newspapers can spark the entrepreneurial spirit.
Show Them It Pays To Think About Purchases
Buying impulsively often leads to a poor price or buying an item that really isn’t valuable. If your child wants to buy anything that costs more than $15, have them think about it overnight. Count the money out of their jar so they realize the impact on their savings.
Consume Responsibly
If you’re running out and reserving the latest iPhone before it is even available, you’re not setting a good example for your children. They need to understand that it is not necessary to always have the latest gadgets. These items don’t create happiness.
As children become teens, their demands will increase since they’re bombarded with advertisements and subject to peer pressure too. If you’re content with what you own and only replace items when necessary, they’re more likely to act responsibly too.
Create a Simple Budget
Once your child gets a job, earning a few hundred dollars might seem like a fortune. Encourage your teen to use an app so they can plug in the numbers and see how much they need to save and what they can spend while living at home.
Open a Bank Account
Older children should understand the responsibility of a bank account. Accompany them, discuss the account options and let them choose an account.
Have them set a savings goal, such as saving for their first year of college or buying their first car. Teach them about compound interest and how it can increase their savings if their money stays in their bank account.
While you don’t want your young child asking the neighbors how much they make at their job, you do want to spark their curiosity about finance. Besides discussing banking, consider teaching them about other aspects of finance such as loans, insurance, mortgages, investments, etc.
They may not understand the concepts fully, but they will start to see how money flows through the economy and how it benefits them if they use it wisely.
