This is a guest post by Samantha Green from BusyKid.
A lot of parents constantly worry about the future of their children. And maybe that's why for many of them, talking to their kids about proper money management becomes second nature.
Kids, on the other hand, quickly pick up what adults do. You may not be aware of it, but children often notice even the smallest things – and yes, they observe how you spend your money too.
At its core, teaching financial responsibility to children is all about leading by example. Whether you’re talking to them about spending their money wisely or starting a lesson on investing for kids, the most important thing is that your words translate into actions.
To help make your “money talks” more effective, we came up with some useful tips on how to teach children about money management.
1. Choose age-appropriate money management topics.
You can’t feed your kids all the information in just a few sittings. You have to start with the basics and then ease your way into more complicated discussions.
Pick topics that they can comprehend at their age. It's always best to start with physical currency – a practical and tangible way to teach little children about money. After that, you can move on to allowances and how to spend them wisely.
When they’re old enough to understand about banks, interest, and the concepts of saving and investing, you can open an account for them and let them have their own debit card for kids. This will get them into the habit of setting aside money for the future.
2. Don’t forget lessons about saving, budgeting, and sharing.
There are plenty of ways to introduce allowances to kids. You can give it to them regularly, or you can tie their allowance to the tasks they’ve accomplished on the chore chart.
However you choose to deal with allowances, emphasize to them the value of saving and sharing -- but do not tell them how to spend their money. Have them budget it on their own. If they run out of money before the next allowance is due, let them deal with the consequences, so they learn from their mistakes.
3. Show them how to comparison shop.
Another vital lesson your kids need to learn is comparison shopping. When you go to the mall, take them with you and show them how items may be priced differently at different stores.
When you go to buy groceries, have them compare the same products of different brands so they can see the variations in pricing. Comparison shopping will teach them how to evaluate quality and value so they can get more for their money.
4. Encourage them to earn their own money.
Kids in middle school may not be qualified to get a job yet, but that does not mean they can’t earn. There are plenty of opportunities get paid if they’re really into it.
You can promote this by giving them extra allowance whenever they do bigger and more complicated chores at home. Also, encourage them to take on jobs that are within their capacity like babysitting, tutoring, dog walking, yard work, or even holding a garage sale.
Earning money on their own helps develop their self-confidence and independence. More importantly, it makes them realize the value of money.
5. Explain to them what credit is.
Toddlers and kindergartners may not be old enough to understand what credit is, but you can still introduce to them the concept with games focusing on the value of delayed gratification (e.g., the marshmallow test).
When your middle schooler asks you for money to buy something, tell him you'll give him some – but on loan. This means he has to pay it before a specific date and with interest. If the money is not paid on time, have him pay a penalty cost.
Simple exercises like these may not fully explain what credit is to children, but they somehow open your kids' eyes to the idea of it -- and the possible consequences too.
Suffice it to say, sound money management and financial responsibility are two of the most valuable life skills that you can impart to your kids. Starting these lessons while they’re young increases their chance of forming good money habits as they get older.
Just as important is you, as parents, demonstrating the same habits you want your kids to develop. Remember that children quickly absorb the things they see.
About The Author
Samantha Green is the Content Marketing Strategist for BusyKid, the first and only chore and allowance platform where kids can earn, save, share, spend, and invest their allowance. A mom of two, she enjoys spending time with her kids and reading books to them.