There are many benefits to teaching your kids about money. Not only do you help them build a lifetime habit of saving but you also help them make informed decisions about how to spend their money. Doing this shows them the value of saving money for future opportunities and the importance of financial security.
It really is never to early to start teaching your kids about money. Here are some steps you can take to teach your kids about money starting at any age.
1. The best time to start teaching your kids about money is when they notice it exists. At a young age, children witness money coming from Mom’s purse, or Dad’s wallet, or an ATM. What they see is money readily available but what they don’t see is the context. That is why it so important to teach them about how money is earned and not just forever flowing. When you start out trying to teach your kids that money is earned, try encouraging them to look at the consequences of a purchase. For example, if they buy that toy car, they can’t buy the toy tool set too.
2. The next thing to do is to help them understand how to earn money. Explain to them that money is received in exchange for working or providing a service and that you can only spend what you receive. You could illustrate this by picking a chore that they can do (suitable to their age) and then paying them for getting it done. When I was a kid we got paid for picking apples. We had three apple trees in our backyard and my brother and I would get $1 for every bag we picked. Trust me, that $1 was hard earned. It took a long time to fill those bags but boy were we excited when we got paid.
3. Next, you need to teach your kids about a paying schedule. Just like as adults we have payday, our kids need to get used to having their payday. To do this, start an allowance that they receive every two weeks. This will help them set goals for how they are going to spend and save their allowance.
4. Finally, teach your kids to distribute their money. Just like in the real world there are wants, needs, and donations. This can be done by dividing their allowance or extra earned money into categories. Some families use jars, some use boxes. Even ziploc bags will do the trick. By teaching your kids to distribute their money, they learn sound money management habits like saving up for the things you want. It may take them a few allowances before they can afford that toy they want. It also shows them to always give back and to help those less fortunate. This is really important I feel. Too many kids now a days feel they are entitled to things without earning them and don’t care about the needs of anyone else, just themselves. Good money management lessons early on in life should prevent your child from turning out this way.
There you go. Four simple ways to teach your kids about money so that they can be as financially responsible as they can be and avoid any of the mistakes that maybe you made at a younger age.
So how do you teach your kids about money? What methods have worked well? Share with us.