Helping your children learn to manage money at a young age can provide them with a solid financial foundation and teaches them the true value of money. It will give them a better understanding of the role that money plays in their everyday lives. If you are looking for ways to help your children start managing their money, consider the tips listed below.
1. Be a Good Financial Role Model
Children learn best by modeling the behavior that they see from their parents. This means the first step is examining your attitudes about money and how you handle it, especially in front of your children. Always be mindful of setting a good example, and take advantage of teaching moments that you encounter along the way.
2. Provide Your Child With an Earned Allowance
Your child needs to know that they receive money by working for it. For younger children, you can provide them with an allowance for simple tasks such as making their bed, clearing their dishes, etc. As they get older, you can assign them more difficult household tasks that also benefit the family. This allowance should be their spending money, and they should be allowed to spend it on what they choose. Use the allowance as a teaching tool and let them know if they plan for what they want, they can save up their money and buy it.
3. Help Your Child Start Their Savings
A crucial part of learning to manage money is understanding the value of savings and how to save to meet your needs and wants. Teaching your child to put their money aside to grow until they have the amount required to make their purchase can not only show them how saving their money can result in them getting what they want but also teaches them patience and discourages impulse spending.
4. Teach Your Child About Credit Early
Credit problems are one of the biggest financial issues that young adults face. This is often due to a lack of understanding of how the credit process works. When credit is misunderstood, it is often viewed as free money, and young adults fail to realize how much it costs them regarding their ability to borrow and how much they will end up owing. When your child enters their teen years, consider loaning them money for something they need. Structure a repayment schedule as a deduction from their allowance and have them also keep track of the balance each week until the debt is fully paid. This is also an opportunity to discuss how interest works and other fees that often accompany loans. Keep it simple. It's not about being accurate with all the tiny details. It's about helping them learn on their level in the hope that those lessons stick.
5. Show Your Child the Benefits of Being a Wise Steward
One of the most significant parts of managing money is controlling spending. This can mean making the best choices when it comes to making purchases and also deciding whether or not the value of the item is worth it. When your child wants something, discuss with them if they think they need the product or will use it for a while or see if they were perhaps just swayed by savvy advertising. The why behind a purchase is very important in determining if it is a wise purchase. Once they have decided the product is worth buying, help them to learn to comparison shop to get the best price.
6. Set Budgets and Stick to Them
While every parent loves to indulge their children on occasion, buying them what they want all the time is setting them up for failure in the future. It's helpful to set budgets and limits when you can, and stick to the budget so your child learns to make choices and understands that staying in budget is important. Budgets can be used for special occasion outfits, back to school shopping, or when planning a family outing.
Even though it is your job to provide for the needs of your child, it is also your responsibility to teach them about finances and money so that they can have a successful future. By following the six tips above you can set a good foundation that helps your child understand how to manage their money as well as the importance of doing so.
This content is developed from sources believed to be providing accurate information. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.