Tips on teaching your children how to manage money

[frugalandsimple]

1. Start early
Parents have to start teaching their kids money lessons at a younger and younger age--as early as 3 or 4. That's because children are learning about what money can buy early on in their lives. Academic research shows that children who are bombarded with television commercials and other advertising can grasp and identify brand names at 2 years old.

2. Show them the money
It may sound simple, but the only way kids will truly learn to handle money is if you give them some to handle.

3. Give them a budget
Giving kids an allowance only teaches half the lesson. While allowances provide children with income, kids must also learn at an early age that they have obligations to meet with that money.

4. Show them the Time Value of Money
It's fine to teach kids that there's virtue in saving money for the future. A more powerful lesson, however, is teaching them that the world literally rewards those who save. To do that, kids have to understand the basic concepts of compound interest and the value of money over time.

5. Show them the Statements
It's helpful to show kids what the family actually spends on certain items, like cellphone service, groceries, and utilities etc. Then when they get a job, it will give them an idea how much is needed for bills each month.

6. Have Regular Family Money Meetings
Talking to your kids regularly about family finances also helps clear up misunderstandings. "Kids often learn about money more by watching what parents do rather than listening to what parents say."

7. Show them how to Save
No child is born with an innate knowledge of how to save. So parents should consider teaching their kids the mechanics of saving early on

8. Be Professional with Money
Kids won't take money seriously if parents don't handle it with respect

In many homes, discussing about money is taboo. Children learn best about financial management by modeling their parents and talking about it.

[DJ1972]

DD and I just had a lesson on unit pricing while grocery shopping not too long ago. She was "shocked" to find out that bigger was not always cheaper.

[nuisance26]

~Good tips but I have to say I disagree with #3. Making your own choices and mistakes with money teaches you to respect money and take responsibility for your choices(plus it's alot easier to recover from a money mistake when your talking about a $5 allowance and not a week's paycheck). I wouldn't give my kids an allowance and them tell them how they must spend it. What obligations does a kid have anyway?~

[Greebo]

~Good tips but I have to say I disagree with #3. Making your own choices and mistakes with money teaches you to respect money and take responsibility for your choices(plus it's alot easier to recover from a money mistake when your talking about a $5 allowance and not a week's paycheck). I wouldn't give my kids an allowance and them tell them how they must spend it. What obligations does a kid have anyway?~

Speaking as a non parent, this is how I've known parents with kids to do it.

Kid's Budget:
Saving 20%
Giving 10%
Spending 40%
(set your own percentages)

Every dollar gets divided up so the kid learns to save early and to be generous with their money early.

Speaking as someone who's parents did NOT teach me this early, and who allowed me (even worse!) to advance on my allowance to an extreme amount (I was perpetually at least a month advanced on my allowance), IMO not teaching kids to do this at an early age will do them a grave disservice later in life.

We learn math early, we learn english early, we need to learn money early.

My $0.018372 cents (adjusted for inflation)

[nuisance26]

Speaking as a non parent, this is how I've known parents with kids to do it.

Kid's Budget:
Saving 20%
Giving 10%
Spending 40%
(set your own percentages)

Every dollar gets divided up so the kid learns to save early and to be generous with their money early.

Speaking as someone who's parents did NOT teach me this early, and who allowed me (even worse!) to advance on my allowance to an extreme amount (I was perpetually at least a month advanced on my allowance), IMO not teaching kids to do this at an early age will do them a grave disservice later in life.

We learn math early, we learn english early, we need to learn money early.

My $0.018372 cents (adjusted for inflation)

~Your parents may not have instructed you but my parents did. I plan to teach(and am actively teaching)good money management. My point was to address that if you're teaching in other areas, an allowance will allow a child to practice carrying out what they've learned. Think of it like an English lesson. The textbook and in-class guidance lays out how to craft a book report, that's the instruction. The teacher(or parent) doesn't start off every paragraph with the first sentence. The teacher places their trust in the child and allows him/her to freely attempt. Speaking from experience knowing that you have control over something is very empowering and develops your sense of obligation and responsibility.~

[IntlMom]

Yep, my fav. tip it taking them shopping with you and teaching them by showing them how to make each and every dollar go farther. My boys are 10, and each of them understand this concept very well.
My 2 year old daughter always wants to "help" me by holding coupons in the grocery store as we shop......she is learning (by my example) already at her young age.

I really like this thread - thanks!

[C@rol]

Wonderful information to share with your children and grandchildren. I tried to do some of these with my children.