It is never too early or too late to teach children how to be smart about money. From the moment they are given their first allowance, it is important that they know the value of money and how to spend and save wisely. Here are some tips on how to teach children to manage their own money.
1. Ask them what they spend on with their allowance
When parents give children allowance it is assumed that it is for the children’s needs for school such as lunch money, or joining fees for extra curricular activities. No matter what amount you give your child, ask how much he or she spends on lunch, and what are the other things they use their allowance for. This is not simply to hound on children regarding their spending habits, but to also for the parent to realize if their children are managing their money well.
2. Encourage them to open a savings account
By opening a savings account for your children, you are teaching them a very valuable lesson: it’s not how much you spend but how much you save. Parents can jumpstart this good habit by taking them to the bank and involving them in the enrollment process. If necessary, you can provide the preliminary deposit requirement and let them know that this amount is theirs if they regularly maintain a good number in their accounts. You can make trips to the bank on a regular basis to encourage them to save regularly.
3. Discuss spending options with them
If children are getting used to the habit of asking their parents to buy everything they see and want, they will grow up relying on other people for their financial or monetary wants. Strike a bargain with children when they ask you to buy something for them. Offer the item as a reward, or pay for half and encourage them to save for the item. If you think that the spending is absolutely unnecessary, talk to your children about why they want it and what value it will add to their lives if they purchase the item. This will teach them to be more practical with their spending habits.
4. Teach them the importance of hard work
One of the most important lessons parents usually tell their children is that money does not grow on trees. Money has to be earned through hard work and productivity. Parents can offer their children monetary reward for doing extra chores around the house, or offer rewards for a good performance in school or extra curricular activities. Give them an increase in their allowance if they show effort to do well in school, or have shown initiative around the house. This is a good way to instill the value of money, especially if they worked hard for it.
5. Be smart with credit cards
Nowadays, parents are more lenient when it comes to giving their children access to credit cards, as they are conscious of cases of emergency. Be wary of giving them credit cards, especially if they are not the ones paying for it. This will encourage them to be smart about money and credit. They can avoid being in debt early in life, and this will persuade them to become more resourceful when it comes to finding ways to earn money.
Teaching children to be smart about their money will help them in the long run. They will learn that money is not just something that mom and dad can give them anytime, but rather a responsibility they must take on to prepare them for adult life.