Raising your children to be money smart is an essential skill that will benefit them for the rest of their lives. Teaching your kids from a young age about money will help them to understand how money works and they will find it easier to learn how to manage their money.
Here’s how to raise money-wise children:
Teach Children How Money Works
Children need to understand that an ATM is not a magical machine that just spits money out at you whenever you want it. They need to know that in order to get money out of the ATM machine money needs to go in. They also need to understand that money is made either through business transactions (if you are Mompreneur or business owner) or by working for someone and being paid a salary.
Show your child the different notes and coins, explaining how it all works together. It will become easier for your child to understand from the age of about 5 or 6 years old.
Give Your Child A Piggy Bank
Give your child a piggy bank as soon as possible. You never know when a relative will give money for a gift, so you want a piggy bank ready to receive it. You can tell your child that his piggy bank is his “ATM” until he is old enough for a bank account.
Teach your child to always put any money he receives into his piggy bank so that he forms this good habit early on.
Play Shop At Home
Young children love to play shop. You can make pretend money with them out of paper and then make a pretend shop. Find items around the house and put price tags on them. Take turns being the shopkeeper and the shopper.
It is great pretend play for your children to work out what they must pay and how much change they must receive.
Give Your Child Pocket Money
Don’t soil your child by giving him a lot of money. You want to make it enough money so he can buy something small each time he gets his pocket money, but not enough to buy anything big.
This will teach your child not only to budget but also how to save up for something more expensive that he wants. Encourage him to save up for something nice rather than always spend all his money as soon as he gets it.
It is also important to emphasize to your child that if he wants something after he has spent all his pocket money he will have to wait until the next time he gets his pocket money.
Try to give your child as much free rein as possible to decide what he wants to buy with his pocket money. You can advise your child that he could save up for something really nice rather than blowing it all on sweets but let your child make the final decision
Let your children know that there is nothing stopping them from earning some money if they want more than their weekly allowance. Think about extra tasks they can do around the home to earn more money and encourage them to think outside the box.
If your kids have a hobby they can sell the things that they make. They could do woodworking, knitting or make cards. They could also bake cookies or cupcakes to sell or have a lemonade stand.
Help them to understand the concept of working out the cost of making the goods and how to work out their pricing so they make a profit.
Your children can also offer services such as washing cars, mowing lawns, walking dogs and babysitting.
Lending A Hand
Your child may need some help with purchasing an expensive item, for example a teenager that wants to buy a car. A teenager may not have the means to take out a personal loan or any other type of loan that they may need. Chances are good that you wouldn’t want them to take out a loan from a bank anyway at that young age even if they could.
If you have the means you may want to give your child a loan and work out an arrangement for them to pay you back. This will give your child an understand of how a loan works in the future for example when taking about a home loan.
If you want to help them out but also encourage them to work towards saving up for things themselves you could get create and offer to match whatever deposit they manage to save and then work out a way for them to pay you back for the difference.
All of the above tips and activities will help your child to form an understanding of the value of money and help your child understand the importance of being frugal and saving up for the things that you need.
What things have you done with your children to help teach them about money? Share your tips.