If you want to raise your kids to be financially responsible, then you should teach them money management now. And if one of your kids is still a toddler, an age-appropriate way of teaching him or her how to handle money should do the job.
By teaching them about money management today, your kids will already have an understanding of how it works at an early age, and that appreciation of finance is going to help them when they grow up.
To get you started, here are some suggestions for money management lessons for your children:
1. Money is a product of hard work
Many kids probably think that money is that paper thing that comes out of a machine, and that’s it. You need to impress upon them that money is earned through hard work, not something you just take out of an ATM. Draw up an allowance chart and pay them for doing their chores to help you make that point.
2. Saving up
If they’re earning money from their chores, encourage them to save some or all of their money. Teach them the importance of setting money aside for future use. Give them a little push by giving the little ones piggy banks, the older kids bank accounts.
3. Wants vs. Needs
When your kids are already earning some money, they may be tempted to splurge on something they want. They will need to learn the difference between wants and needs, that the former can wait, while the latter has to be a priority always. Teaching them that can equip them with the ability to make sound financial decisions as they grow older.
The ability to create and work around a budget is going to come in handy when your children enter adulthood, so teach them (especially the older ones) budgeting basics, and in case they go over budget before allowance day comes, never give them money in case they come begging for it to teach them a lesson.
5. Monitoring of expenses
Your kids will find managing money easier if they list down and track their expenses. Have them make a budget sheet so they can see how they spend money. If they’re spending too much on trivial things, it will pop out of the budget sheet and likely cause them to cut back on their spending.
6. The concept of credit
The world revolves around credit, and it would be great if the kids can get a clear picture of what credit is all about. Kids need to know that while borrowing money isn’t necessarily bad, there are risks involved, and they have to be sure they can pay debts that they undertake.
7. Financial goal-setting
Having them draw up plans on how they’re going to use their money is a good way of teaching them about setting financial goals. With set goals, your kid will have targets to achieve, and it will push them to try to earn more or do better managing their money.
8. Delayed gratification
Kids may tend to want to get what they want immediately, but you can temper that impulse by teaching them about delayed gratification. It’s a lesson that will help them through life, as it will instill in them the idea that there are priorities, and what they want doesn’t necessarily have to be one. It will also teach them to be patient, that they can always buy that thing they want later so they can see to something more important first.
It’s true that talking to kids about making investments can be a tad too early. Still, educating them about investments will open their eyes to the idea of their money growing over time. So talk to them how investments work, how important they are for the future, and if you have a few investments of your own, show them documents to pique their interest
All that talk about money, money, money could turn your kid into someone who’s only interested in acquiring lots of it. Balance things out by teaching them the value of sharing and giving back to the community.