Most of us want to teach our children important life skills. And one of the most important is proper money management. And, while we don’t generally want our kids to become money-grubbers, it is important to begin teaching them, early in life, that understanding how money works is important. Laying a foundation for them to learn how to save, spend and stay out of debt ensures that they will be financially able to help you into a nice retirement home down the road ;0)
Tips for helping kids learn about money management
Here are some things you can do to help your children learn about managing their personal finances:
- Explain money choices. Children need to learn the difference between needs and wants. My little guy thinks that if I say “We don’t have money for that” I am also saying we don’t have money for things like food. Instead, I explain to my four-year-old: “We choose not to spend our money on that. We would rather use our money for other things that we need.” Explaining that we can’t have everything that we want if we want to take care of our needs conveys the importance of priorities.
- Let your child make money choices. An allowance, of an appropriate size for your child’s age, can be a great teacher. My son Gavin doesn’t quite get an allowance yet, but we do let him put our spare change into a bank. He can use the money to buy items at a neighborhood yard sale or make a decision on a small treat at the store. We make it clear that he can only buy what he has money for, and that he has to decide for himself what he wants to spend his money on. We do not give him money for the small chores he does around the house (picking up his toys, clearing his dishes, etc.), since those are things everyone helps with as contributing members of the family.
- Learning to save. Older children can begin to learn how to save with help from special banks with individual compartments. You can discuss how money gets divided up as your child puts money into different allocations. Having slots for goals like “college” and “Play Station” help your child see how saving up can help him or her reach goals. Make sure that one is for “rainy day” savings, and set a good example by letting your child know that you also put money into savings.
Resources to help children learn about money management
There are several online resources that can help you teach your child about personal finances. Here are two of my favorites that help cover most of the money management bases: