How to Teach Money Management to Children
Teaching money management to your kids is one of the best things you can do for them. Knowing how to manage money will help your kids save for their future, make smart financial decisions, and get the most out of their earnings. Being good money managers will ensure their stability long after they’ve outgrown your financial backing.
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Teach money management on a day-to-day
Teach your kids to make the link between the food, toys, and goods they receive and the cost of those things. When you go to the grocery store, point out the costs of foods you purchase and teach them how those costs add up to a total when you check out. Involve your kids in the process of paying your bills.
Give your kids a modest “budget” per month
Create a family budget and assign a small allowance to each of your children. Allow them to “carry over” any amount they do not spend in one month to the next, teaching them the value of savings. If they want a more expensive item, teach them how to save their money to purchase it. This will not only teach your kids about proper budgeting, but will also make them feel valued and important in helping to manage part of the family budget. If you need ways to trim a little off of your budget, ask your kids for ideas and input.
Allow your kids to make money mistakes
Managing a budget is a learned process, and you have to be willing to allow your kids to make mistakes in order to learn. If your child is saving for a large item, but wants to spend all his savings on something he wants spontaneously, let him. Do not try to dissuade him from the purchase. Letting him spend his money according to his own decisions will reinforce the idea that he is responsible for his money. He will then face the decision of whether or not his impulse by was worth the sacrifice of his long term goals.
Be a good example for your kids
As in all aspects of life, your kids will learn significantly by watching you. Spend your money responsibly and explain to your kids how you budget. Show your kids what categories of items or expenses you budget for, and how you meet that budget. Point out items that you have saved for—like a house, car, or vacation—and illustrate some of the sacrifices you made to afford these items. Your example will show your kids the benefits of good money management.