Have you ever caught yourself wishing your parents would have taught you more about money from an earlier age? Learning how to manage your finances can be quite the undertaking, but starting from an early age can really instill the value of money in kids. Plus, you will have to worry about them a little less when you send them off on their own. Under you good guidance and with a few tips, your kids will understand the power of money and how to make it work for their wants and needs.
Pick a System
In order to give your kids an understanding of how money works, you need to pick a system for doing so and stay consistent with it. There are a few good ways to do so. The first is the traditional allowance. You pick a dollar amount that is not too much money – so they can learn to save for things they want. They earn the money by completing household chores (great motivator).
The second option is to give them a set amount of money each month that they need to learn to budget for the things they want. Giving them a lump sum monthly may be tough for them in the beginning, but either way they will learn valuable lessons.
Set a Budget
No matter what method you chose, sit down and map out a budget together each month. Ask your child to think both about what they want this month, but also what larger purchases they may want to make in the future. You can even incentivize a “savings” account that accrues small amounts of interest from the bank (you).
Let Them Make Mistakes
After setting the budget, let your child make their own mistakes. If they decide to ignore their budget and spend all of their money at once, don’t stop them. After they are all out of money and ask for more, they will learn the hard way what it’s like to have to wait for payday! I am quite sure your child will be very upset, but some tough love will do them good in the long run.
Take Advantage of Teachable Moments
Your kids will make mistakes with their money. It’s what you do with those mistakes that will teach them how money works. Take advantage of those teachable moments. If your child has spent all of their money and don’t have any left for after school snacks, you may have to go over the budget with them again and show them what went wrong. These moments of “financial trouble” will show your kids the value of money and how to account for future purchases. It won’t always be easy for them or you, but they will thank you when they are older.