We want to give our kids the world. We would do anything and likely spend anything to provide our children with the things and experiences they need to get the most out of life. However, we also want them to learn to be frugal, responsible, and savvy adults who can handle money wisely. As a parent, it is important to get involved in your child’s financial education in order to ensure they have the facts and do not find themselves in money problems later in life. These money skills can be introduced to children of all ages to best prepare them for financial security.
- The value of hard work. An allowance is a great way for kids to learn about working hard in order to earn their money. Start small with minor chores and tasks around the house such as taking out the garbage or washing the dishes after dinner. As kids get older, they can be responsible for their laundry or cleaning around the house. This will teach your children that money is not just handed to them; it must be worked for and deserved. If they don’t hold up their end of the bargain, they will not receive the monetary benefits in the end. When deciding upon an amount of money to give your child as an allowance, consider what you will expect him or her to start paying for independently. If they are young, perhaps they will just need enough for a small toy or to go to the movies with their friends. As they develop into their teens, maybe you will require them to pay for their cell phone bill or gas money. Discuss these expectations with your child ahead of time, and as expectations change with age.
- How to save for later. If you choose to give your child an allowance for completing chores around the house, give them some guidelines. Require them to put a set amount of money aside for “later”. This could be in a piggy bank or in an actual savings account where they may make some money in interest. Whatever the case, explain to your child that it is important to have money saved for the future as things arise. This will get them in a good habit of budgeting and planning. If there is something expensive they really want, suggest that they save for it in stages. They will appreciate the item even more when they had to wait and use their own money. This gives kids a sense of freedom and accomplishment they will not get from having something handed to them.
- Teach children to budget. Usually this is best done when you lead by example. Sit down with your child and show them how you allocate your own income to purchases. Show them how much money goes to groceries, utilities, and other bills. Teach them how to look for deals and compare prices. A great online site to use is greatdeals.com. Here, you can show kids how to find bargains and discounts. Show them how you utilize coupons to save money on household items. If your child will be using their money to pay for different things, help him or her set up a budget of their own, estimating how much they expect to pay on food, activities with friends, or shopping.
- The importance of giving back. Aside from a savings fund, it is a good idea to teach your child how to give to others at a young age. Donating to charity is a way to channel earned money into a good cause. Ask your son or daughter to find a charity that is meaningful to them such as Save the Children or ASPCA. When it is something they care about, they will feel a greater sense of reward sharing their profits with others who are in need.
- For older kids, explain to them how credit cards work. Credit cards are not “fake money”. Your kids likely see you flashing the shiny plastic card regularly, but explain why you use them and how they can be both a valuable and dangerous item. Credit cards can be an excellent way to earn “points”, establish a good credit rating, and they can be more convenient than carrying cash. However, your child must know that credit cards are a huge responsibility. They must be paid on time every month. If payments are missed or are late, there are interest charges. Essentially, credit cards are a short-term loan from the bank. Tell your child this means they will be paying what they owe plus an additional fee and penalty on top of their original expenditure if they are not punctual about payments.
Money is an important topic and life skill to discuss with your child. Often they are misinformed by peers or become irresponsible with money because they don’t understand its value. Be sure to help your child understand the value of hard work, how to save, budgeting with sites like greatdeals.com, giving back to charity, and the facts about credit cards in advance. Using these tips and rules will help you guide your child into becoming a responsible adult with money sense early on.
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