Parents focus on teaching children to be responsible and accountable, but many times financial responsibility is a skill that’s not sufficiently stressed. Money matters are matters that should be discussed at a young age, but its about finding the right way to discuss money that’s important. If you’re looking for fun and effective ways to stress how important it is to manage finances wisely so that poor money management doesn’t affect your little one in adulthood, here are 6 ideas to consider.
1: Make Saving a Habit At a Young Age
Many people believe it takes only 28 days of doing something to make it a habit. If you want your children to form financially responsible habits, make saving a habit early on. If your child earns money or receives money as a gift, set up a saving system and explain that system to your child so that they understand that their money isn’t disappearing. If you teach your child to save early, it’ll be a habit as they become adults, and if you allow your child to spend everything in one visit to the store, this may become a habit as well.
2: Give Allowance for Actual Work
If you just hand your child money, they will grow up thinking that they don’t have to work for it. Children who have to work for what they earn appreciate the money more and tend to spend it wisely. Make sure you have a list of chores for your child and associate a value so that they see what it’s like to truly earn the money that they save and spend.
3: Make Your Own Form of a 401(k)
Many employers offer a retirement savings matching in a employer-sponsored 401(k), and this gives you an incentive to save for yourself. If you want to create this incentive as well, set up a matching system so that your kid can make big purchases later in life. This motivates your child to save and also helps the family avoid debt for the purchase of something like a first car.
4: Teach the Fundamentals
Balancing a bank account, writing a check, and making automatic bill payments are all fundamental skills. Don’t assume your child will catch on. You should teach the fundamentals on balancing accounts, calculating interest, and how to find and order checks. By teaching the basics, your teen won’t fall into traps with banks who charge for insufficient funds or bounced checks because they will keep track of their accounts.
5: Don’t Be Afraid to Let Them Make Mistakes
Your child has made mistakes and they will in the future. They must learn when and when not to spend money, and sometimes the lesson is in splurging. If your child receives money and they want to blow the money on a game or an outfit, let them do it. Know when to step in and when to let your kid be a kid so that they can learn from experience.
6: Planning the Budget
Kids don’t typically understand how much it costs to run a household. If you want them to understand what it costs to live in the real world, let your child budget for food for the week or even a day. By giving them a limit and suggestions on meal plans, they will see that a dollar doesn’t stretch as far as they might think. Family budgeting is a skill they will need throughout their life.
Proper money management is a skill that can be taught young. Become the teacher and make your child the student so that they can live a financially responsible life where they don’t have to worry about making major spending mistakes.
Earnest Parenting: help for parents who want financially responsible children.