Essential Money Lessons Every Child Should Learn
It stands to reason that the earlier in life lessons are taught, the more time one has to thoroughly gain understanding. When it comes to money, this adage couldn’t be more true! We believe in teaching fiscal responsibility to children. This gives them an opportunity to learn and grow and time to put each principle into practice. We’ve compiled a list of the seven most important money lessons, each of which can be adapted as your children grow. Start early and, by the time they are taking full financial responsibility, they’ll have a great foundation from which to move forward.
1. Give them an allowance
An allowance is more than just money, it’s a lesson in money management. Whether you give it as payment for chores or just because, show your kids how to save and how to keep track of what they earn. A jar or piggy bank is perfect for your little ones, but your teen may be ready for a bank account and debit card.
2. Teach them how to budget
Explain the ins and outs of spending and saving. Give them a choice of something they want to buy (a toy, a movie ticket, a pass to an amusement park) and show them how to make a plan to save for it. A great way to make a visual point is to create three money category jars, spending, saving and giving, and agree on the percentage that will go into each jar. Older children can use a notebook or a computer for their budget.
3. Help them understand that everything costs money
It seems like young children ask for everything. While they know where to go to get what they want, they may not understand how these things are purchased. Explain to them the value of their allowance as compared to what they want to buy. Teach them how to prioritize. If they are saving for something specific but then see something else they want, help them understand that purchasing that item will mean delaying the purchase of the original item.
4. Show them how to do their homework
Once your child is ready to purchase something, show him how to shop smart. Help him learn to compare prices and look for coupons as a good first step.
5. Give them the power to make their own decisions and mistakes
Teaching your children about money can be frustrating. You want them to make the right decisions and be done with it. But to truly understand, your children have to put these principles into practice. Talk about what they want, advise them and then let them make the final decision. If it goes wrong, gently help them figure out where they could have done better.
6. Teens and credit
Credit cards definitely have their place in your financial plan but, if you don’t know how to manage them, they can be a gateway to debt. Before long, your mailbox will be full of credit card offers for your teenager. Before they apply for anything, make sure they understand how credit cards and interest rates work, as well as the potential dangers of accumulating too much debt.
7. Be the example
Like it or not, your kids keep a very keen eye on everything you do. Show them how to make smart financial decisions by involving them in your own plans. Let them vote on what to save for and then let them see you doing it.
Being a positive, guiding force in your child’s life and teaching them these basic financial skills will carry them into adulthood with a solid understanding of how to make it on their own. Congratulations, you’ve got yourself a financially literate member of society. Good job!
