Children are fascinated by money. But most are not shown the power to save and invest in school or at home. Raising financially savvy children includes educating them on a variety of aspects, from budgeting to planning, earning, and economics. Here are 5 tips on how to teach kids about money.
1. Set an example
Setting a good standard for them, they will be much more likely to follow you as they get older. Turn your daily activities into learning experiences. Going to the bank, to the store, or quick ATM trips, for example, can be a perfect opening for a discussion of your values and how you use money.
2. Explain that things cost money
You need to do more than just say, “This toy car package costs $ 5, son.” Help them take a few dollars from their jar, take them to the store and physically hand over the money to the cashier. This one simple action will have more impact than a five-minute talk.
3. Give commissions, not allowances
It is not enough to just give your children money. Instead, pay them commissions based on their homework and house choirs, such as littering, cleaning their room, or mowing the lawn. This concept helps your children understand that money is earned – not just given to them.
4. Teach your kids to save for college
For young kids, visuals can be a useful learning tool. Some experts suggest that young children do not use a piggy bank but a glass jar so they can see the money they collect. So you buy your child a glass jar and teach them the value of saving money. Then, they grow older, and it’s time to start thinking about college. Have you talked to your child about paying for college? Do they plan to work on a summer job? Perfect! Have them take a portion of it (or more) and throw it into a college savings account. They will feel that they have skin in the game as it contributes to their education. This takes money management to the next level and hopefully will prepare them to manage healthy financial habits.
5. Help your kids create a budget
Now is the time to put your child in the habit of budgeting his income – however small. Because your child is likely glued to a mobile device, perhaps using a finance app can help create a budget. They must learn the importance of planning their money while still under your roof. Money management is a vital life skill, and it is never too early to teach children about economics.