TEACHING KIDS ABOUT MONEY
Ask a small child where orange juice comes from and there is a strong possibility they will answer 'the supermarket'. It is easy for an adult to laugh at this response and should serve as a reminder that kids just don't know the answers to some of the seemingly simplest of questions.

And if you think the above response is funny, ask a youngster where one get's money. That answer may tickle you even more. Kid's have no clue and will likely tell you 'from trees' or something equally bizarre. 

As parents, it is very important that we teach our kids all we can about money and how to manage our money. This will not be a easy task. However, properly educating them early about budgeting and needs vs. wants will lay the foundation for strong financial understanding and money management as adults. However, in the event that you don't teach them or misinform them, then there is a strong probability that they will succumb to credit card debt once they reach adulthood.

You'll also want to show your kids, if possible, that you contribute regularly to a savings account for your retirement.

Teach by example
Children look up to their parents. They will do what you do. So, the easiest way to get your message across to the kids is to be smart with your money. Some of the easiest things you can do that will go a long way is to explain how you budget. A very important angle of budgeting you'll want to exhibit is that one must always have limits to the amount of money that they spend when making all types of purchases. Also, break down the difference between purchases that can be considered essential (needs) and those that are not (wants) as well as fixed and discretionary expenses. It's important that after you expose your child to these simple tactics that you follow through and continue to practice them yourself. You may even want to submerge yourself in a scenario that shows your spending restraint. For example, establish that you are taking the family out to the amusement park and that you have allocated $50 for spending while there. If by mid-day that $50 has already been spent, make it clear that no more money will be spent for the remainder of the day on non-essential things during this outing.

Give your child an allowance
Granting an allowance is the best thing you can do to help educate your child about the value of money and how to manage money. When to start giving an allowance is going to be up to your judgment and personal situation. The earlier the better but you do want to wait until your child has reached a mind capacity to comprehend that stuff being purchased costs money.

A good idea would be to give the allowance in two parts; one for them to save long-term and one that will allow them to use for immediate purchases. For example, if you are giving $2/week as their first allowance, give them a one dollar bill and then four quarters. Encourage them to put $1.50 into their long-term savings (open a bank account for them) and use the $.50 how they want. Explain to them that they can put the full $2 into savings every week if there is nothing that they want to buy and/or that if they find themselves with any amount of the 'spend how they want' money just sitting around that they can transfer that money over at any time to savings. Show your child their monthly bank statements and explain how their money is growing via interest.

Have your child keep a money diary
Don't expect anything too detailed or fancy initially, especially if your child is under the age of 13. But, the earlier you can get them to regularly contribute to their money diary the better. You'll need to help them set this up. Have them divide the page in three; inputting their allowance in one section, the amount being contributed to saving in the other and how much they will have to spend on whatever they want in the last column. As the child gets older, they can include sections for 'financial goals'. Financial goals can be an amount they are looking to have in savings within a certain time frame. Another goal can be a target amount to save for buying a 'want' like a new phone or radio. 

Older kids should be encouraged to work
Some parents may make working a requirement. At the very least, kids in high school should be employed part-time. A job has many learning tools. Most importantly it will reiterate the importance of being on time (like they have to be for school) as well as respecting authority, managing their time (balancing work, school and fun) and developing good work ethic (completing a task timely, accurately and in its entirety). A paycheck has an amazing sense of achievement tied to it, likely more so than an allowance.  

In addition to utilizing the above info for teaching your kids how to become savvy with their money, there are tons of websites, like Family Education and Money Instructor, that will help educate your child about managing finances.

Family Money Topics Not To Discuss With Kids - There are aspects of the family finances that should be kept for the adults.

Prioritizing Spending - Even adults have a hard time determining what their priorities should be.
Credit for Those Under 21 - Individuals under the age of 21 may have a hard time establishing their credit.
Teaching Teens About Debt - Equally important to managing money, teens need to be familiarized with how debt works.


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