It’s a parent’s responsibility to teach their children good money management. This includes how to budget, how to save and how to manage credit. But unfortunately, these lessons often fall through the cracks. As a result, some children don’t learn the value of money until getting their first job. This, however, is a disservice to children. If you want your children to be financially savvy, you need to teach them the value of money at an early age — before they start working. Here’s how:
1. Encourage saving at a young age
From the time a child is old enough to receive an allowance or gift money, you need to encourage saving.
Saving doesn’t come natural for children, and they’ll be tempted to spend every dime on kid stuff, such as candy or toys. But as a parent, you need to stress the benefits of developing a savings routine. For every dollar your child receives, either as an allowance or a gift, have him or her put at least 10% of this money into a piggy bank or open a bank account for your child.
2. Let your child purchase items himself
It’s your responsibility to provide your children with food, clothing and shelter. But as far as their “wants," there’s nothing wrong with children buying some items themselves. This teaches the value of money at a young age. If your son wants a new pair of shoes or a new bike, require that he save up for the purchase. Or, you might have him save half the purchase and you pay the other half.
With this approach, he learns from a young age how long and how much work it takes to save up and buy the things he needs and wants. Also, when children make purchases with their own money, they may develop a greater appreciation for items.
3. Show children how to shop for the best deals
Whether you’re buying your children shoes or purchasing for the house, involve your children when shopping. It’s important that children learn how to seek deals. As a youngster, he might want to buy an item as soon as it hits the store rack. But as the adult, you know that waiting just a few weeks for sales can result in getting the same item for less. This teaches financial patience and how to get more bang for their buck.
4. Teach children about bank accounts
Many parents give their children a piggy bank when they’re young. But as your child becomes older, you’ll need to move their savings into an actual bank account. Many banks have youth and student accounts that do not require a minimum opening deposit or charge a monthly maintenance fee. Use this opportunity to explain how bank interest works, and how children can grow their money with a savings account.
5. Involve children in paying the household bills
As your children become teenagers, you’ll need to show them how to pay bills. Some children have warped views of personal finances. However, if you have open discussions with your children, and if they sit in while you’re paying the household bills and budgeting the checkbook, it can open their eyes and help them understand how much income it takes to run a household. They may also develop a greater appreciation for how hard you work to put a roof over their head.
Don’t feel that your children are too young to learn money lessons. The sooner you instill money values, the less likely they’ll make major money mistakes as an adult. However, when teaching kids about money, the key is teaching lessons that are age-appropriate.
Photo Credit: Money - Savings, by 401(k) 2012, via Flickr