We want our kids to develop good habits early in life, right?
Ever think managing money is one of them? In my opinion, it is never too early to start teaching your children about the value of money.
Sound money management is as fundamental to your child’s life as any other life skill and is a tool that our kids will need to use for the rest of their lives.
Here’s how to get started with teaching kids about basic money management right when they’re young and rarin’ to learn:
Show ‘em How and Show ‘em Now
The easiest way to do it is to, first do it yourself and lead by example. One of the most important influences in the life of a child is a parent and you’ll be surprised at how much a child learns only by observing.
Also, it makes sense to start NOW. Young children naturally enjoy collecting and putting away pennies. This is a great starting point to help them understand the concept of money.
To introduce the concept you can involve them in the household budgeting activities and even when you are out shopping. Being a part of the decision-making process will help them understand the value of money.
You can help kids understand the plethora of options and how you choose a product by looking at the value it brings to you as against the price paid.
For instance, you can get candy and chocolates ranging from under a dollar to twenty or even fifty dollars. Which one do you normally pick and why?
I call this understanding ‘Value for Money’.We normally associate a product’s value for money by looking at it’s quality at a given price point.
This is one of the most important concepts that your child can learn early in life. It helps kids understand that there is a certain amount of money that comes into a household and there are some expenses, such as rent, food, utilities and clothing that must be paid for from that money.
More importantly they understand that money is a certain amount and not an infinite amount.
Once this is clear to a child, you can introduce the concept of saving and spending wisely. When teaching money to children, a lot of it comes down to how to save and spend effectively.
To start with, you might use a piggy bank for preschoolers but the concepts learnt go a long way in helping them manage their savings account and money in general.
No matter how old your child is, they can be part of family decisions on what and when to buy.
In general, I recommend four guiding principles to help teach kids about money and saving:
Help Kids Create a Budget
Help your child create a simple budget and help them learn to follow it. They should know how to plan their spending, instead of spending on impulse.
Make budgets fun, create an interesting, color-coded sheet and depict savings or goals achieved in as creative a way as you or your child would like.
Once a child enjoys budgeting as any other activity they would want to budget every month and follow it regularly.
Teach Kids Short-Term Saving
This is an important concept especially in times like these where credit card borrowing can create a debt trap sooner than you think. Help your child learn that the money needs to be there to be spent.
Spend what you have, not what you will have.
“You want to buy an Xbox 360? Well, let us find out how much does that cost. If you take $40 from your monthly allowance, you could have that in 6 months. If you take $60 from your monthly budget, you could have it in a little over 4 months. But either way, that will mean cutting back on KFCs and buying little or no toys for the next couple of months.”, is an explanation that can work to help a young kid understand how saving works.
Let the Kids Pay the Bills
While our toddler doesn’t have (thank God for that!) bills of her own yet, we like to encourage her to handle the money and pay the grocery bill at the store or the parking guy. It is just a small way of teaching your child about money, what it does and how it works.
You can try this with older kids just as easily. Does your teen have a post paid cell phone? Give them the decided amount in their monthly allowance, and allow them to pay the bill each month. If they are late, they pay late fees from their allowance.
Learning to Wait
Help your child understand that purchases can wait. Therefore, if the LED TV would be cheaper at Christmas it is okay to defer your purchase until then.
Of course, there will be instances when you cannot wait for weeks or months to get a sweeter deal. Such cases will, then, help kids differentiate between a ‘need’ and a ‘want’.
How have you introduced your child to money?