In these hard economic times, teaching our children how to handle money might be one of the last things on our mind. When we’re dealing with our own lackluster home equity and job security, why in the world would we want to give our kids money to play with?
I say…why not?!? Helping our children learn from our mistakes might be one of the best ways to give them a REAL idea about how important savings and smart investments are. I know I’m STILL learning about that myself.
My daughter is now three years old. We’re starting to work with charts…ALL sorts of charts. Ones for the potty, ones for behavior, and…one for chores. Now there will be no monetary value placed on potty successes…HA, but an allowance dependent on good behavior and “bonuses” related to chores are being put into action!
Let’s talk about some ways you can teach your children to be financially responsible:
Pay your kids for a job well done – We get paid for the work we do at our jobs right? Well your child’s only job is to be a kid. There are some responsibilities you can assign based on their age that are perfect for getting paid. Assign a dollar amount to any variety of age appropriate chores and pay them immediately after they do them (if they do them well). Little ones will benefit from sticker and magnet charts to remind them of their daily tasks.
Teach kids to buy their own things - In the beginning, a simple piggy bank is just for fun. Mommy and Daddy give their kiddo some extra change to drop into the slot. Good times! Eventually you want to start talking about what money is used for and that items they want have a cost. My daughter has recently been on a “I want something new every day” kick. I’ve been begging her off by telling her to wait for Christmas and to save it on her list of things to ask Santa for. The thing is…the holidays are a LONG way away and a three-year-old just doesn’t have that sort of patience! We decided to let her save money for her own treats. I bought a new piggy bank that has slots for saving, spending, giving and investing. Now we can talk about what all those things mean as her money collects in the piggy’s belly.
Saving for big ticket items – Right now it might be an expensive toy or video game; but tomorrow it might be a car, and way way WAY down the line it could be a house. Children need to learn that saving means for the short term and for the future. Help your child set a realistic goal. Maybe your son REALLY wants a new train set but his birthday is another eight months away and Christmas is even further. Explain that he needs to save his money to buy the new toy. Some parents may wish to match dollar for dollar (think of it as priming for their 401(k)). Display a picture of the item in question to keep your child on task when they ask to spend their allowance on small things. They can decide to spend how they wish but remind them that it will take longer if they spend now. Another idea is to open a savings account for your child with birthday and holiday monies. Your kids can choose how to enjoy the gifts funds but they learn how to deposit and withdraw in the process.
- Dave Ramsey on how to teach teens about money
- CNN Money on financial education for kids
- Family Education on giving to charity
- Family Education on 15 ways to teach kids about money
- Investopedia on teaching kids about investments