How to Get Your Children Started on Money Management
If you want your child to understand the importance of money, teach him or her early on how to manage money. Many parents encourage their children to start a piggy bank. This is a fun way for children to get started on money management. As they grow, talk to them about the use of money and that it is to be earned by hard work. Money doesn’t really grow on trees. Taking advantage of their ever-curious minds, you can instill a consciousness about money and its importance quite early.
Pay for Jobs Done: Give them a task and pay in lieu of the job done. Ask them to put the money in the piggy bank for later expenditure. It is important to explain to them how spending is easier than saving and hence too much spending can empty the piggy’s stomach, leaving it hungry.
Explain the Difference between Saving and Spending: To explain the difference between spending and saving, ask them to save money in two glass jars labeling one as’ spending’ and one ‘savings’. Each time they need to spend they will use the spending bottle. This will give them a sense of how easy it is to spend than to save. It will teach them budgeting. That’s the first step of money management you can easily teach your little one.
Pay in Lower Denominations: When you are paying your child for the chore done, pay him in lower denominations, so that he can keep a track of the number he is putting in his savings and spending account. Unless he is quite grown up to know adding and subtracting big numbers, keep it simple.
Allowance Limit: No matter how well established you are financially; do not spoil your child by meeting all his demands. Limit his pocket money to a certain amount and teach him to control his wants.
Discuss Finance with Them: As they grow, continue discussing finance with them. Involve them in your grocery shopping. Sit with them to discuss deals and best purchase offers. This will give them a sense of saving even from the estimated budget.
Encourage Them to Share: It’s not just enough to show them the importance of money. They must also learn how to share it. Earning is not enough unless you put it for a good cause.
Create Savings Account: As they grow older, open a savings account for them and ask them to operate it themselves. For example, they can deposit their pocket money on their own thus feeling responsible for it. Let them save a portion of their pocket money there and watch the money grow. They can also donate a portion to charity.
Money-related Games: Encourage them to play money-related board games and computer games.
Involve in Stock Investment: There are several financial websites that allow dummy investments in stocks. Children can open an account, pick the stocks they like and can keep track of the rising and falling prices of stocks. An early start to know the share market will leave them with one of the strongest learning tools for investing.
Give Them a Loan: Lend your little one some money (e.g. $10) and tell them that they need to return it with 25 additional cents. This is to teach them they need to use their money wisely and to not borrow indiscriminately.