Teaching children how to manage and budget their money can help them make better financial choices as adults.
Your approach to discussing money will depend on your child’s age. The earlier you start teaching your kids about money, the more they’ll be prepared to handle it when they get older.
Every day offers teachable moments, according to SmartMoney magazine. For example, a trip to the store offers the opportunity to explain price comparison and how to get the best value for products. A stop to the automated teller machine (ATM) gives parents a chance to explain how to use the machine and where the money comes from.
Some other tips:
Teach children about work and money
According to an article on personal finance site Mint.com, parents can start by teaching young children about coins and dollar bills. Show them how many coins equal a dollar, how many single dollars equal a $5 bill, and so on. Parents can then explain the relationship between work and money by telling their kids why they work, who they work for, what they get in return, and why they need money.
Teach children about saving and budgeting
While allowance can be a controversial topic for parents (some view it as a privilege, others view it as a right), many agree that allowances can teach children important life skills. Parents can teach their children to be financially responsible and cooperative by creating and following a plan for chores and allowances. They can start with a base allowance that their children must manage carefully. If the kids want extra money, they can accept additional responsibilities beyond their basic chores.
Some sources recommend starting with a weekly allowance, then stretching the allowance payout period to biweekly as children age. By the time they are teenagers, parents start making monthly payouts. By distributing allowance this way, children can learn how to save and budget their money to last longer.
Teach children to be smart consumers
As kids begin to understand the value of a dollar, parents can teach them how to be sensible consumers. Teaching them the difference between wants and needs, as well as the importance of saving, can help them avoid costly and debt-filled problems in the future. Children are observant, so these lessons are best led by example.
Teach children about giving
Parents should talk to their children about giving and how money can be used to help others. They can introduce their children to these concepts by asking them to help choose what charities to give to and by participating in charity events with them. Young children may understand charitable giving better if they actually give money directly by placing the money in a collection jar or basket.
Author: Darice Britt