There is no right age to teach children about money. The younger they are, the better because they can develop and hone money-handling skills at an early age. Teaching children money management can give them a leg up and help them thrive as adults, for they will know when to spend and when and how much to save.
Read on to learn 12 ways to teach children about money.
Use A Clear Jar For Savings
Piggy banks are good, but they are not ideal for small kids to see how their money accumulates and grows. Let them see how the jar fills up when they add money. Yesterday, it was 5 dollars and a few dimes, and today, there are more dimes or maybe another dollar bill.
Set An Example With Your Money Habits
Kids learn faster when they see rather than when they are taught. They are watching you when you indulge in an impulse buy, contemplate whether you should buy that box of cereal or not, or frown when you look at the monthly grocery bill. It is more likely that they will pick up money habits from their parents or caregivers. Set a healthy example for them.
Teach Them How Money Works
Telling them that action figures cost money doesn’t teach them about money. Show them how money works. Ask them to take a few dollars from their savings jar to the store and let them pay for the action figure with their money. They will learn how money works when they see their jar money getting exchanged for the toy.
Help Them Weigh Their Options
Children between 9 and 12 years old have a better understanding of spending and saving. Furthermore, at this age, children are able to weigh decisions and take ownership of their decisions. Help them understand that the dollar can only go so far; thus, they need to weigh their options and spend on more important stuff. If they buy a drone, they won’t have the money to go to the arcade.
Discourage Impulse Buying
Kids are impulsive and persuasive. However, don’t cave in. Tell them they can use the money from their savings jar or allowance. Better still, ask them to wait a day and decide whether they need to make that purchase.
Start An Allowance
The jury is still out on whether kids should be given a weekly/monthly allowance or a commission paid for chores they do around the house, like taking out the trash, washing cars, or mowing the grass. Whichever the case might be in your household, the intention is for children (tweens and teens) to start handling small amounts of money and making rational decisions on how to spend it.
Set Up A Bank Account
When your children are teenagers, you should set up a simple bank account with them. This will help them manage money from a savings jar to a bank account. It will also help your children, with your help initially understand how to operate a bank account, which will prepare them to manage a much bigger account when they grow up.
Emphasize Savings
As kids grow, they are likelier to want things that exceed their allowance. It is time to introduce the concept of savings. Encourage your kids not to indulge in instant gratification and save for future wants. Encourage them to set aside 10% of their allowances/commissions. Having a bank account will come in handy at this point.
Encourage Them To Make Money
Teenagers should not depend solely on allowances. They have plenty of free time, like fall, summer, and winter breaks. Let them make the best use of these breaks by taking up a job. Encourage them to make money that can be used towards their movie dates, buying their prom dress, or, better still, their college education fund.
Teach Them How To Budget
Teenage is a good time to get your children in the habit of budgeting their income—irrespective of their allowance or how much they make. They should understand why it is necessary to make a plan for their money. You can help them prepare a budget for a day out—it can include food, drink, and transport costs.
Teach Them The Importance Of Investing And Compounding
Many of us give our children allowances and encourage them to save for special occasions. However, we can introduce the concept of compounding to them and show them that their money can grow exponentially over time. Give your child 10 dollars with a promise of a 10% weekly increase. They will soon see how their 11 dollars will become 50 and more in a few weeks. This concept of compound growth will make them stay ahead of the game when they enter the professional world.
Teach Them The Dangers Of Misusing Credit Cards
Your kids always see you buying things at the tap of a credit card. It makes them think money is easy. Teach them that credit cards are a debt and that one needs to be responsible with borrowed money. A credit card is helpful in emergencies, like when they are stranded with a flat tire, but running up a debt is often a bad idea. Also, it should be made clear that they need to pay back every dollar they own so that lenders can trust them in the future when they need to make a big purchase. Take this opportunity to explain the difference between credit and debit cards and the dangers of high-interest debt. The more they know about debt, the more likely they will handle it wisely.