How to Raise Money Savvy Kids: Teaching Kids About Money
Having a solid education in money management is something that can carry a child over the course of their entire life. But, how exactly do you raise money savvy kids? Here are a few tips to help get your child's financial future off to a good start.
To begin, help your child learn the importance of personal responsibility, saving, investing, and goal setting. These concepts can be quite broad but if explained in abstract, child friendly terms, most children will grasp these general concepts. With the following seven concepts in mind, create hands on activities that your child will love.
Teaching your child about budgeting does not have to be a difficult task. If your child receives an allowance, has a part-time job of some kind, or receives monetary gifts have them to itemize these items on a sheet of papers. Divide the paper into two areas: "money in" and "money out." It is also a good idea to divide the money out section into three categories: spending, saving, and sharing/Giving. For younger children, it may be beneficial to have three separate piggy banks in order to divide the money.
There will always be times when your child will ask for some miscellaneous impulse item. Encourage them to earn all or part of the money for that purchase. This is a great way for your child to connect the experience of earning with the satisfaction of getting a want. This fosters goal setting, discipline, and the concept of personal choice.
Opening a savings account for your children is a great way to encourage them to become good savers. Consider establishing an agreement in which you match some portion of every dollar they choose to save. Once you have an account establish, review the statements monthly with your child. Talk about how the account is growing due to deposits and interests.
We all enjoy spending money and children probably enjoy it more than anyone. Your child's spending budget should be well established and adhered to for the most part. As a parent, you will naturally want to supervise how they spend their money. This is a good practice, however, unless they are considering something truly inappropriate, you may want to allow some leeway with what they would like to spend their money on. This a great lesson in personal choice for your child.
Setting aside money for a worthwhile cause can go a long way to instilling a sense of responsibility and the importance of helping others within their community. You may want to discuss several options with your child to determine which organizations they wish to support.
Quite often child on the road to being money savvy will ask for a loan. Depending on the reason and purpose of the loan, it may be something for you as a parent to consider. Repaying debts is an important aspect of managing money. If you choose to lend your child money, establish a reasonable repayment schedule and stick to it.
Older children may be ready to learn some basic concepts of investment. You may want to consider allowing your child to choose a company in which to invest, purchase a couple of shares, and allow them to follow the shares. Along the way explain the many factors that can affect the stock's success.
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