Money management is not just for grown-ups. As a matter of fact, children value and respect money more if they are taught how to manage it right from the beginning. Following are five ways to help your kids build a healthy relationship with money.
1. Demonstrate Money Management Skills
The first way to build money management skills for children is to show them. Be a good role model and show good money management skills yourself. If they see you spending properly and living within your means, as well as saving, they will learn to do the same and, from an early age, develop a respect for the importance of money.
2. Kids’ Allowances and Savings
Kids should be encouraged to start saving money early on. Make a ritual out of giving your children a piggy bank when you start giving them an allowance and then have a competition for who is able to save the most or for the longest and so on. Let them use the saved money to buy a special treat or do what they would like to do the most.
You can find out from your bank what savings options are available for children of various ages and encourage your children to invest in a formal savings account or take them along to your next visit to the bank, showing them how banks functions and what they do. Make it interesting rather than merely instructive and chances are they will enjoy putting aside money each month and seeing it build up over a period of time.
3. Show Respect for Money
By encouraging kids to take on part-time jobs and work during holidays, you will be inculcating in them respect for money and the effort it requires to earn it. Once they know the amount of work it takes to earn money, they will think long and hard before spending it needlessly and on things they don’t really require. Keep them in the loop about bank and credit card statements, letting them know how your finances stand, without being ominous. This will enable them to see money in a different light rather than just as a spending medium.
4. Explain Credit and Mortgage
It also can be a good idea to teach children about mortgages and credit cards. Depending on their age, explain how these instruments work, the rates of interest and when is it actually wise to use a credit card. For this, you may have to do some reading up as well, especially if you aren’t the financial type. Or you may want to get a friend or a partner who is good with money to explain this to all of you. Sometimes, children understand better when it is someone other than their parents explaining things.
5. Demonstrate Wise Spending
In order for money and kids to understand each other, take your kids with you on weekly shopping trips, so they see you making wise choices and understand more about spending and making the right choices. Explain when it is important to buy quality items, even if it costs more and when is it all right to go for lower costs and average quality. This will enable them to become smart shoppers and also develop the right money-management skills.
At the end of the day, money management for children rests on example. Kids would imbibe the right values if they can see everyone in the family displaying the same principles and rules regarding money. Most importantly, by using these simple suggestions, you will start a tradition of creating a family that has the right money-management skills.