Teaching Your Kids About Money
Money is something we all need, but money management is not a skill you are just born with – it is something you must learn. If you want your children to be smart about how they save and spend their money, you should start teaching them while they are still young. Below you will find some helpful tips for how to teach your kids about money.
Where Does Money Come From?
It is not uncommon for children to view money simply as something that comes from the bank or the ATM – many children do not understand that there is a limited quantity to your money or that it is something you must earn.
Before you can teach your children how to properly manage their money, they need to learn where money comes from. One simple way to do this is to start giving your child a weekly allowance – it doesn’t need to be much, but it will help your child to learn the value of money. You should also let your kids pay for small expenses (like a piece of candy or a toy they want) with their own money so they can start learning how far their money will go.
Talk About Cash Versus Credit
Another common misconception many children have is that credit cards or something entirely different from cash – they do not recognize a credit card transaction as the same kind of purchase as a cash-based transaction. The older your children get, the more they will come to understand this concept at which point you should start teaching them the value of using cash over credit. Your child needs to learn that credit cards aren’t free – not only do you have to pay for what you purchase, but you may have to pay interest on those purchases. Make sure your child understands this before he gets his own credit card (or a credit card in his name that you pay.
Responsible Saving and Spending
When your child becomes a teenager, it might be time for him to open his own bank account so he can learn the proper way to save money. If your child has been saving his allowance in a piggy bank or coin jar, have him physically take his money to the bank and open the account himself.
A great way to teach your child how to save is to have him create a wish list of things he wants and their costs. It is a good idea to teach your child how to distinguish between short-term goals and long-term goals and how to save for each. For example, you might have your child start a short-term saving goal for a new video game as well as a long-term saving goal for a car of his own. Have your child set aside a set portion of his allowance each week toward those goals to show him the meaning of saving.
Everyone manages their money differently but while your child is still young it is very important to teach him the basics of saving and spending so he can manage his money smartly as an adult. In addition to following the tips above, you should consider paying your child for chores or help him find a job when he is old enough. The earlier you start in teaching your kids about money, the better of they will be.