Teach Your Child About Managing Finance
Managing his or her finances effectively can be one of the most important life lesson that you can teach to your kids. It is actually not so difficult to teach your kids about money. Turning everyday activities such as trips to the bank, store, ATM machines can work as the perfect opportunity for opening discussions about your values and how you use money. Very young children can be introduced to the concept of money by incorporating them into some of their games such as pretend store or restaurant.
So many of us look back at our childhood and wish that we would have been taught more about money. So many children go about in their lives without any idea how to manage their money or even balance their bank accounts.
You wouldn’t want your kid to be one of them. Now that you have learned more about managing your finances you obviously want to pass on these learning to your children to help them not make the same mistakes as you.
Teaching your kids about money depends a lot on their age. Too much information to a toddler might prove to be useless as he or she may not be able to fully understand what you are trying to tell and form their own opinion based on what they think you mean. Let us look at what methods can be applied to children of various age groups to most effectively teach them about managing finance.
At this age your child is mostly dependent on you for his or her requirements and spends the maximum amount of time with you or your spouse. This is the ideal time to start building the foundation for sound finance management.
Set up a Saving Jar: Use any clear jar to set up a saving jar for your child in your home. The piggy bank idea is good but doesn’t give the kids any visual of how much they are saving. With a clear jar they can see the money increasing in front of their own eyes! Talk to them about this and get them excited about saving.
Be an Example: Remember that your toddler is always learning from what habits and behaviour you are displaying. If you are constantly using your credit cards to pay for grocery or dinner and then fight with your spouse at the end of every month about money they are bound to notice. Set healthy and realistic examples of spending and saving which they are more likely to follow as they grow older.
Show them that things cost money: Simply telling them that something costs X amount of money will not be of any help for your toddler because they are still too young to actually visualise the value of money. What you can do is take money out of their saving jar to buy them their toys or treats. Let your child handle the money himself /herself. This will do more for them than any five minute lecture can.
At this age your child is more capable of weighing their decisions and understand the consequences of each decisions that they take.
Opportunity Cost: Show your child the concept of opportunity cost. Take them to the supermarket with what money they have and tell them that he or she won’t have enough money to buy a particular pair of shoes if they buy the video game. This works better than saying you can’t buy this or that without any proper reasoning. You will be letting your child weigh his or her options and the resulting consequences which will teach him/her to take responsibility for their own finances.
Give Commissions Not Allowances: Don’t just handover your kids allowance without reason. Give them money for the chores they do at home such as cleaning, taking out the trash, doing the dishes etc. This will help them realise that money is earned and not just given to them.
Point out the importance of giving: Once your child starts earning and saving little money start to teach them about the importance of giving. It can be to a local church, organisation, charity or even to someone who needs help. But make sure your child is confident about the cause. This can prove to be a valuable lesson on how giving doesn’t only affect the receiver but also the giver.
This is a difficult age when your child will be moody and have plenty of outside influence telling them how to manage their money among other things. It won’t always be easy and will take time and effort on your part to teach your teen how to successfully manage their money.
Open a Bank Account: Open a simple bank account for your kid and let them take control of this. Deposit their earning from the household chores into the account instead of handing them cash. This takes money management to a whole different level and makes them more responsible at a later age with heftier sums.
Help them find Jobs: Teenagers are always in need of money and they have plenty of free time in their hands. Put two and two together and you have the perfect solution to both making them earn money as well as keeping them occupied instead of being surly and bored stuck at home. Sit down with them and look at summer jobs together shortlisting and helping them choose. This would also teach them that there is no short cut way of getting money
Don’t just handout money: It is okay to help out your kids when they are in dire need once in a while. But giving them money without question every time or asking for explanation as to how they spent it will prove to be counterproductive as they will never learn the values of saving or spending within their means. Also if you are helping your child out make him or her understand that it is a debt that needs to be paid back. It is a very important lesson to teach to your teens as soon they will turn 18 and be hounded by credit card companies. If your child is not aware of why debt is a bad idea they will fall victim to the credit card companies.
Finance Management is a subject most of us often neglect to pass on to our kids from early on as a result they grow up clueless. Taking out some time and investing in consciously teaching your children the importance and ways of finance management will benefit both you and your child in the long run.