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
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
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.
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.
for Those Under 21 - Individuals under the age of 21 may have a
hard time establishing their credit.
Teens About Debt - Equally important to managing money, teens need to be
familiarized with how debt works.
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