11 Ways to Teach Younger Kids About Money
By Money Crashers's David Bakke for GalTime.com
It's an unfortunate truth that money management and personal budgeting are not taught in schools. Until that happens, teaching your children these lessons is a responsibility that lies solely with you.
Maybe you have had - or currently have - financial problems in your life. Don't let this make you feel as though you are not able to pass on lessons to your children. This should not preclude you from raising your children to be financially fit. In fact, it should allow you to provide them with more insight on the topic and help them to avoid making the same mistakes you've made. If you can instill in your children the basics of smart money management now, you'll give them the tools that they need to have a sound and rewarding fiscal life.
There are various ways to teach kids how to save money and learn important money management skills.
1. Use Visuals
No matter the lesson, I always try to use real money with my son to demonstrate my point; I also use my bank and credit card statements whenever necessary. Although he does not yet understand the concept of interest, I just tell him that this is the price you have to pay if you need to borrow money. Save abstract concepts until your children are older.
2. Speak to Them on Their Own Terms
Whenever I'm teaching my son about money, I use simple and easy to understand words. Furthermore, I always physically get down to his level when we speak. This will further your child's ability to comprehend what you are saying.
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3. Be Interactive
Purchasing new toys provides a perfect opportunity to make a money lesson interactive. My son is allowed to buy brand new toys once per month, and his spending limit is $40.
When we go to the store, we make the choice together. He picks something out, and I tell him whether or not he still has money for another. Sometimes he spends it all on one item, but most of the time he picks out several less expensive toys. He is also allowed to use any surplus for the following month. He always makes sure he leaves a little left over, which shows me that what I am trying to teach him is sinking in.
4. Give an Allowance
Issuing an allowance to your child is a great way to encourage responsible money management. While the amount and frequency of the allowance is up to you, be sure that there are requirements for earning it, such as a clean bedroom, helping regularly with the dishes, or other chores. You can also give them "bonuses" for special achievements, such as getting good grades in school.
5. Open a Savings Account
To promote the concept of saving money, take your child to your bank to open a savings account in their name. Show them how to fill out a deposit slip, and take them to the bank so they can deposit their own funds. When the statement arrives, be sure to review it together so they can see how much interest they accrued. ING Direct, for example, offers a savings account specifically for kids.
6. Match Their Savings
To add incentive to the concept of saving money, I match my son's savings. Therefore, he knows that any money he puts aside will immediately be doubled.
7. Encourage Donating
The idea of donating has a feel-good effect to it, and encourages children to be charitable. Unused toys and clothes that no longer fit are great items that can be passed along. Now that my son understands the donation process and knows where his unneeded items go, he proudly packs them up and always makes sure to tell the employee at the charity to make sure they go to a good home.
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8. Buy a Toy Cash Register
Using a toy cash register is a great way to teach the basic concepts of buying and selling. My son and I take turns being the customer and cashier, which helps him to understand the idea of exchanging cash for goods and how to make change. It also helps with his math abilities.
9. Encourage Them to Work Smart
While hard work will inevitably lead to more money, I've chosen to take a slightly different approach. While I do explain that hard works pays off, I also emphasize that by working smart and being more efficient, you'll become a more productive individual, which will also lead to more money.
10. Help Them Find a Job
There is no need for a child to wait until they turn 16 to try to find work. I started my first business when I was 8: I purchased a pack of note cards and listed my services, such as cutting grass, raking leaves, shoveling snow, and other chores. I distributed them around my neighborhood, and before long, I was bringing in a decent amount of money. Young children can also earn income by coming up with small business ideas for kids, including washing cars, walking pets, or even selling items online with your help.
11. Comparison Shop
A final way to teach your children about money is to show them the power of comparison shopping. Often, my son wants a toy from a retailer that I know I can find online for a cheaper price. So we write down the name, return home, and look it up. He is often surprised, as am I, at how much you can save by buying items over the Internet. He especially likes this because he knows he'll have more of his surplus to spend the next month.
What do you do to teach your kids about money? Share your tips in the comment section.
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