Teaching Kids to Manage Money
Start with the Piggy Bank
Importance of Understanding Finance
Children need to begin to understand money starting at a young age, about four years old. We have many adults in serious financial shape, partially because they don’t understand money and how to budget properly. The recent recession has caused the many responsible people to lose their homes and ruin their credit.
Many people live pay day to pay day and only pay the principal on credit card debt, which means they will not be able to get out of debt until they start paying on the principal. A large number of people bought homes with no down payment, and their monthly mortgages cost 40-50% of their income instead of the recommended 25% to 35%, which also must have taxes, insurance and PMI taken into account. With may other costs rising they just don't have enoughmoney to stay current with all their bills.
Learning About Money is Part of Their Training
I know someone who checks her bank balance at the ATM machine, then withdraws based on that information. Obviously she will have problems eventually using that method since she is not taking into account any automatic withdrawals she might have, any checks that may not have cleared or the fact that sometimes the machines are a day behind.
Without a good understanding of money, financial disaster is inevitable. That is why it is so important to start teaching your children about money while they are still young. Even a trip to the grocery store can be a learning experience if you talk to your child about what you are buying and why.
There are numerous board games that involve money, which the family can play together, and there are also Internet site games that will teach children more about money. Teaching them to manage a small allowance is also a good beginning,
Teaching kids money management - How to teach kids about money
Ways Children Learn
Children are very observant and they will watch your spending habits. They hear you if you argue about money. They learn a lot by watching your personal financial dealings even when they don’t seem to be paying attention. Being a role model for your children is invaluable. Actions always speak louder than words.
Ideally, we will teach our children some strong saving habits and how to make smart purchases. My son started this process with my grandson when he was young. He loved Lego’s. He had a couple of little chores around the house and got a small allowance. Then, there was some type of coupons he could get toward purchasing Lego’s. When he had enough money and coupons he would be delighted to get his next Lego set. He is a senior in high school now and works enough to pay his own car insurance and have some spending money as well. He naturally looks for bargains as his mother is a wise shopper, and he manages his money well for a seventeen year old.
As children advance toward adulthood their understanding of money will hopefully increase, and they will begin to learn about the meaning of investment. If you have a child that works, make sure they have a savings account and deposit a little of their income into that account each payday; ten percent is a good steady amount to save. They will see their savings grow and this will enforce their understanding of having secure financial stability. Help them when they make purchases, explaining why one item might be a better choice than another.
Low Income VS High Income Households
Children from low-income households have less opportunity to be in financial institutions or learn about their products and services according to the Financial Services Authority (FSA) of England, so they don’t always understand the services offered by banks.
New research shows a large gap of knowledge between the low-income household children and higher income households. Children from lower income homes see their parents operate primarily with cash. They are aware of their parents putting cash in different places for particular bills using jars or some type of hiding place. They do understand the dire consequences of running out of money.
Whereas children from higher income homes understand a variety of methods of paying for things, such as checks, credit cards and even paying bills online, but they still have limited knowledge about budgeting ones income.
It is important that all children learn the necessary basic skills to managing their personal finances. This really should be taught in school as well, as it is not taught in low income homes. If we are going to remove the inequities between lower and higher income children, then it is essential this information be taught somewhere.
Money Management Should be Taught in the School Curriculum
Jobs, Money and Savings
When I was in grade school (yes, many years ago) we had a savings account set up in the school. I presume it was from a local bank. We could deposit money every Wednesday morning, which was usually not more than a quarter, but this gave us the opportunity to see those small amounts grow.
My sister and I each had our ways of earning a little bit of money. I helped an older lady do a few little things around her house each week. My sister received a potholder making kit for Christmas at her request, and she made pot holders which she would sell to the neighbors.
The small amount of money we earned taught us to start saving, and when I started working in high school I always had a savings account. We were from a middle class family, and we earned money to help buy clothing to add to our wardrobes. This was not uncommon during that era.
Teaching Children About Money Management
Whether you are rich or poor your child’s focal idea about handling money will be learned by watching you. How well you train your children about money is what will determine their financial future, and that is probably one of the most important skills for an adult to possess. You can start with such simple steps, and let that body of knowledge grow as the child matures
The copyright, renewed in 2018, for this article is owned by Pamela Oglesby. Permission to republish this article in print or online must be granted by the author in writing.