Financial skills aren’t taught in schools, but parents know that teaching their children how to handle money well is an essential life lesson. It is just as important as training them to put on their clothes or shoes.
Some parents may find it difficult or challenging to teach their young ones smart money management, but it can be done. There are parents who have found effective ways of helping their children understand the value of money, and in particular, how important it is to learn how to spend correctly and save. Likewise, leading by example and showing kids how to manage money helps a lot.
Technology also plays a vital role, especially since even children as young as five already know how to use a gadget and an app or two. As such, there are parents who use apps like a debit card for kids, where they schedule chores and allowances for their children, give bonuses for exceptional behavior and performance, help manage money, and encourage their kids to donate to chosen charities.
According to a report in the United Kingdom’s The Money Advice Service, teaching children financial skills will help shape their behaviors if parents guide and influence them well. Here are some tips on how you can effectively encourage your kids to practice smart money management.
Tips for Teaching Your Kids to Practice Smart Money Management
1.Set a good example.
Your kids look at you as their role model, so they learn by watching and imitating what you do. Set a good example by ensuring that your attitude about money is a positive and encouraging one.
Choose to do the things that will help your kids learn how to handle money well. For example, if you need to choose between spending money on a new pair of shoes and getting the refrigerator repaired, which will you do? The practical option, of course - the one that benefits everyone in the family.
2. Assign chores to your kids.
One of the first things you need to teach your kids is where money comes from. Teach them the value of hard work and determination to get what they want by assigning and scheduling chores.
Create a schedule table or chart that indicates the tasks assigned to each child and how much they will get once they finish their chores. For the smaller kids, choose the simplest, lightest chores, such as picking up and organizing their toys and fixing their beds. Other tasks to include are setting and cleaning the table, washing the dishes, taking out the garbage, and walking the dog.
The chore method is also the ideal way to start giving your kids their allowance.
3. Use the jars method.
Find at least three clear jars and label each with “Spending Jar,” “Saving Jar,” and “Sharing Jar.” Show the jars to your kids and explain what each one means. Every time they receive money – from completing a chore or maybe a reward for doing good in school, or perhaps a birthday gift, the money is divided among the three jars.
Explain to your kids that the spending jar is for buying their wants (i.e., chocolate or candy bar) while the saving jar is for money he or she will use to buy more expensive items (such as clothes or a big doll). The sharing jar is for giving out to a charitable institution or a worthy cause.
4. Guide your kids in setting financial goals.
Your kids may be too young to invest in a house or business, but they have financial goals, too. They have things that they want to buy. Your daughter may have long dreamed of owning a dollhouse; you can help her set this as her goal. Your son may have plans to buy a bike; allow him to set this as his goal. Guide them as they make decisions so they’ll choose the good quality but affordable options. You can use the Savings Jar for these goals.
Encouraging your kids to aim for their goals helps them learn the value of working hard and saving to reach that goal. When they finally buy the items they saved so hard for, teach them to appreciate, celebrate, and be grateful as well.
5. Open a bank account for your kids.
Most banks have special savings programs for kids, and you must take advantage of this. Open a bank account for each of your kids. Bring them to the bank with you, so they’ll know how you did it. Teach them how a savings account works using the simplest terms possible. Show them their passbooks, as well.
Demonstrate to them how to make a deposit, and then later on, when you think they’re ready, let them do it (with you beside them, of course!).
These are just some of the things you can do to help your kids understand smart money management. Don’t forget to guide them throughout their journey, and always remember to be a good example to your kids.
