Financial literacy is crucial, and the sooner that individuals develop money skills, the better. By teaching children about money from a young age, parents are giving their kids invaluable resources for the future. Read on for ideas on how to teach money management to children.
1. Providing an allowance is among the most important strategies to teach children the value of money. They never will learn to manage it if they do not have some of their own. Some experts recommend giving $1 per every year of a child’s age, at regular intervals.
2. Give your child an allowance in such a way that makes saving easy. Instead of giving your child a $10 bill, for example, give him ten $1 bills, so that a portion can be set aside for saving.
3. If your child wants to borrow money from you for some purpose, then consider how it could be a lesson in loans. Charge a bit of interest until he or she pays you back at the end of a very short loan term. He or she definitely will get the impression that it is better to spend what you have than to borrow.
4. Open a savings account for your child at an early age – around kindergarten, or whenever you feel comfortable in doing so.
5. Let your children decide if they want to take money out of their accounts. If you do not allow them to do so, then they might resist against saving in the first place.
6. Explain to your children where your money comes from and how you earn it.
7. Think twice about giving money as an incentive for good behavior. Children may learn that they do “good” things just for the monetary payoff. Perhaps even worse, they may decide that the deed is not worth the money after all!
8. Allow your children to feel a sense of accomplishment when they purchase something that they really want. While certainly part of parenthood is providing for your children, the satisfaction of earning purchases is an important lesson to learn.
9. Strive for consistency when making purchases for your child. For example, if you buy jewelry for your daughter, then do not tell her out of the blue she must use her own money on a specific purchase. Likewise, if your child is responsible for buying his own candy, then do not randomly buy it for him without reason.
10. Explain to your child how different people have different amounts of money. Money is not everything, but you want to make it work for you in the best way possible.
11. Play games with your children that stress the value and use of money, such as Monopoly or Life.
12. The first time that your child receives a sum of money, help him or her to decide what to do with it. Discuss purchase options, but make the decision up to them. Of course, encouraging your child to save part of it is a good idea.
13. Allow your child to keep his or her own money. It should be the child’s job to keep track of it and to keep it safe.
14. Have your child save his or her money somewhere where it can visibly grow, such as in a glass jar.
15. If your child asks you to buy something expense, consider offering to split the cost. If he realizes how much money will have to be saved for the purchase, he might decide to save for something more affordable instead.
16. Ask your child to clip coupons with you. If any of the products are intriguing to her, then let her have it to use.
17. Take your children grocery shopping and ask them to help you compare your options.
18. In addition to an allowance, provide children with the opportunity to earn more if they decide to do extra jobs around the house. These should not be “chores” that already are expected, but rather acts that go above and beyond what they should do already.
19. Teach children that with money comes responsibility. Encourage them to set aside a bit of money from a young age for charity or donations.
20. Your children will make mistakes with their money – let them. They will not learn the consequences of poor money management and the responsibility that goes along with it otherwise.
21. If your child has items that she no longer needs or wants, then encourage her to think about what would be best to do with them. Selling them at a garage sale or donating them are much more useful choices than throwing them away and having them sit in a closet.
22. Teach the difference between needs and wants. Explain that you have both too, and how you make decisions about purchases.
23. As your child gets older, gradually increase the amount of purchases for which he is responsible.
24. Encourage your child to come up with creative ways to make money for him or herself. Selling lemonade, feeding a neighbor’s pet, etc.
25. Show your child how to plan for spending. When he or she wants to make a specific purchase that will require a bit of saving, suggest that the money be set aside in a jar or envelope for that specified purchase. This will enable him or her to see how the money grows to fund the purchase.
26. Deferring gratification is a skill essential for money management. If your child learns to save and to hold off on spending at a young age, then she will be more likely to do so to a greater extent as she gets older.
27. Suggest that your child save a small portion of his or her allowance. Try to relay the message that it is important pay oneself first. You have to make it an objective to save, as opposed to just “saving” whatever is left over after you buy the things you want.
28. Invite your child along to the bank.
29. If your child cannot find her money, then the money is gone. It is essential for children to learn to be responsible with money early.
30. If you are feeling innovative, then you might want to develop a sort of home “bank”. When your child receives money, he can give it to you for safe keeping. When he wants to take some money out, he can write you a “check” to have it back. This not only is good checking and math practice, but it also could be an opportunity to show how “interest” grows on an account (if you are so generous).
31. Explain to your child how everything tangible costs money. Chances are that he or she probably has not thought about how everything in your home, everything for dinner, and every fun outing has been paid for with your earnings. Point out the less obvious examples too – electricity, television channels, etc.
32. Explain how money is involved in your everyday life. For example, if you take your child to a store and pay with a debit card, then explain what it is and how it works.
33. Be an example of good money management. No other financial education is quite as powerful.