As a parent, you want to equip your children with the best life skills. You want to lay a foundation that they can build upon to do well in life. Teaching children about money equips them with the knowledge and skills they need to manage money effectively in the future.
Children who know how to manage money tend to have parents who teach them about money, spending and saving from an early age. Kids aged five and above start to develop the cognitive skills necessary to understand basic monetary concepts, such as identifying coins, figuring out how to count change, and matching small amounts of money to items they want to buy.
We all learn best through practice. The same applies to kids learning about money. Ask them to help you in the supermarket and choose items based on price and value from their preschool years. As they get older, they can help with tasks such as booking tickets. By gradually increasing the responsibility given to your child regarding money, they learn to manage money and save sensibly.
8 Tips For Teaching Your Children How To Manage Money Are:
1. Integrate money into daily life.
Get your child involved with household finances. There are many opportunities around your house that will help your child get a better understanding of how to manage money:
- Take your child grocery shopping. Compare the prices of two similar items. Discuss why the costs might be different.
- Let your child participate or watch when you pay bills. Explain the amounts when needed.
2. Give your child an allowance, but consider the frequency and amount.
Determine what you should give your child for an allowance depending on your household financial situation. The possible benefits of an allowance include:
- The child has actual money to work with.
- The implications are real. Once the allowance is gone, the child needs to save more to buy another item.
If you are determined to teach your child about responsible money management and living within their means, then stick to the rules: keep the allowance dispersed at given times and do not extend “credit.”
Some financial experts recommend disbursing an allowance once a month rather than once a week. This gives the child a more extended amount of time to learn how to manage money.
3. Model good financial behaviour.
You are a model for your children. Are you late on your bills? Are you living beyond your means? Get your own financial house in order and be honest with your children. Let them know why you are doing what you are doing, and then embark on sound financial management principles as a family.
4. Teach your children about choices to manage money.
Spending is not the only option for your child when handling their money. Saving, investing, or donating to charity are viable options.
5. Back off and let the child learn.
If your child wants to spend his entire allowance on an expensive toy that he thinks he must have (instead of several smaller items), let him. In this way, he will learn how money is used up and unavailable (for now) for other things he may have wanted.
6. Share long-term household financial goals.
Explain to your child the value of long-term planning. If you are saving for expensive home repairs this year, your child needs to understand that you are dealing with a finite amount of cash. Other long-term goals – such as a particular vacation – may need to be delayed until the following year.
7. Make it fun.
If you have a stressed attitude about money, your child may carry that forward into their adult life. Express thankfulness and gratitude for the money you have and the ability to manage it wisely. Have your children create a lemonade stand or sell homemade crafts for a small profit if they enjoy doing those sorts of things.
8. Say no and mean it.
Your child may ask for a loan or an increase in allowance, and you might be tempted to give in. However, the child will never learn how the real world works or how to live within their means if you keep giving in. Practice tough love if needed.
Teaching kids how to manage money may seem like a challenging task. Parents are more likely to talk to their children about other things than money. But using these money management tips, you can make your child’s understanding of money fun and accessible. It’s an investment in knowledge that truly pays the best interest.