There’s never a bad time to start teaching your kids about money management. You will be preparing them for the adult world, so that they can stay out of debt in the future. With these guidelines, engaging your children in money management will be fun and meaningful.
Give Them Wages or an Allowance
Be mindful that giving your children wages or an allowance is not simply handing money over to them every week. Your children need to complete designated tasks for them to earn the money, just as they would in a real job. Base the amount of money you give them by what is right for their age. Their weekly allowance can be earned through their normal chores, but if they want to make more money, give them atypical chores to complete like washing the cars or raking the leaves. Be sure to take money away from them, if they don’t complete the chores you assign them. They have to understand the inconsistencies of money when what is expected of them is not completed.
Develop a Budget
Once you give your kids an allowance, it’s time to develop a budget with them. Remembering that you shouldn’t set too many limits on their money will help them understand both the freedom that comes with money, and buyer’s remorse. Give them the categories of give, save, and spend and let them allot money to each of those categories. The give category can be for gifts for friends or charities, and the save category can be for saving up for something big or the distant future. Since kids today are so tech savvy, utilize kid friendly, money planning apps like Tykoon to help teach them how to turn “I want this” to “how can I earn this.” To ensure that your child learns lessons on spending, try not to influence their buying decisions, but rather offer advice. You should also discuss with your children the concept of needs versus wants by emphasizing the importance of spending on needs first, before wants are fulfilled.
Make Them a Bank
Whether you make them a wallet, a piggy bank, or a play cash register, giving them a place to house their money will help them feel independent and teach them the importance of responsibility. They’ll feel like they are in control of their money, while also having a place where they can’t lose it easily. Give them different places to put their money for the different categories of their budget. You could appoint jars that are labeled give, save, and spend respectively.
Lead by Example
It’s hard to teach your kids about saving money or the importance of needs over wants if you’re constantly shopping for new clothes, or buying a new car every year. Leading by example is one of the most important aspects of teaching your children money management skills. They will inevitably pick up bad habits they see you do, so be aware of your spending habits. Openly talk to your kids about why you spend money on certain things, and what you save for with every paycheck.
Teach Them about Recurring Bills
There are several ways you can teach your kids about the recurring bills that are a part of life, and they must always be planned for. If you have a sense of humor, you could implement a tax that gets taken out of their weekly allowance. If they consistently leave their lights on or electronics plugged-in you could take out a utility fee. You can also teach them about insurance, by giving them a continual small price they’ll pay for you to replace something important of theirs if it breaks, like a game system or jewelry. If they have a hard time understanding how insurance works, you can show them homeowners insurance rates in your state. There are many ways to get creative with this money management lesson, just be sure not to get too carried away with fees, taxes, and bills while still enforcing an important lesson.
Help Them Start a Small Business
Igniting the entrepreneurial spirit at a young age encourages creativity and problem solving skills. Whether it’s a lemonade stand, a bake-sale, a lawn mowing service, a dog walking service, or they want to sell their arts and crafts, a small business teaches great money management skills. Help them create a business plan, and a budget for buying supplies for their business. Also, help them come up with a competitive price for their products or services.
From teaching your kids about savings, to understanding bills, money management will become a habit, rather than just something you tell them about through a stale cliché like, “money doesn’t grow on trees.” Do you have any creative ways you teach your kids about money that isn’t mentioned in the list above?