Money Management for Kids: A How to Guide for Your Child to Learn More About Money

These days’ money and debt are constantly in the news. Many Americans are living paycheck to paycheck, and the nation’s debt crisis is a reflection of the growing debt most households are currently saddled with. As a result, you may be wondering how you can teach your children money management skills, especially during these difficult times. The good news is that teaching children about the value of money and how to be responsible with their finances is easier than you think.

Start Early

It’s never too early to start teaching your child about money. According to the site Online Teaching Degree, even a four-year old child can grasp the concept of money and understand that items must be paid for before they can be taken out of a store. You can help your child understand the concept behind money by allowing him or her to pay for some of their own items. If you give a child a dollar to buy candy, and refuse to part with another nickel, then that child will learn how to look at the prices and choose an item that costs less than a dollar.

Allowance

An allowance is excellent for helping your child learn how far a dollar will and will not go. The amounts don’t have to be large, as even a few dollars will help your child start to understand concepts like saving. Take the lesson one step further by having them earn their allowance through chores. However, you will have to tread a fine line.

While you want your children to earn their allowance, you also don’t want them holding their hand out for money every time you ask them to do something around the house. You can tie the allowance to grades, attitude or doing the scheduled chores without being reminded and prodded. Another option is to have set chores that must be done to earn the allowance, but the child needs to understand that they may also have to complete extra, unpaid chores simply because everyone must pitch in and help out around the house.

Early Savings

Once your child has earned some money, they should be encouraged to save at least part of it. Whether you choose fifty percent, ten percent or a number in-between, take your child to the bank and use those funds to open an actual savings account. Encourage your child to keeping putting the same percentage into the account on a consistent basis, not matter whether the money comes from their allowance or gifts.

When your son or daughter receives their bank statement in the mail, plan on reviewing it with them. You can discuss how much money is still in the account and look at how it is growing every month with fresh deposits and interest payments. Then compare the money in the bank to the money your child has been allowed to spend. Over time, your child will start to see the value in saving their money rather than spending it.

Where Did it Go?

As you are reviewing the account statement, take a few moments to discuss where the money went that wasn’t deposited. Ask your child what they bought with the money. Encourage them to keep a record of their spending, allowing them to easily look back and see what they purchased. Discuss the items that were smart decisions, like a cherished doll that has been well loved. You can also discuss the purchases that weren’t as wise, and then talk about the different choices that could have been made.

For example, I have encouraged my children to save their money for something special. At eight years old, my son really wanted a seventy dollar toy he had seen at Disney World. I had no intention of spending that much money on something I thought he would destroy. However, he was given opportunities to earn the funds. Every time he was paid for completing a task, he took all the money he earned and put it in an envelope. He eventually did earn the required sum, and proudly purchased the toy. An added bonus of using this method is that my son has taken good care of the toy since he had to work so hard to get it.

Play Games

Last, but not least, playing educational games is a great way to teach your kids about money that is also fun. The Washington Department of Financial Institutions has several games online that can help your children learn about financial responsibility. For instance, an online budgeting game helps children learn how they can save their money for items they are really interested in.  The games aren’t geared strictly for younger children, either. Teenagers can learn about the value of having good credit by paying a visit to the Bad Credit Hotel.

Teaching your child how to manage money and be responsible with their finances is truly a gift. Early and continuing education can help future generations avoid the financial mistakes of past generations. The lessons don’t have to be tedious or difficult. With the help of online games and real experience, the lessons can be interesting, effective and fun.

So what do you do to teach your child the value of money?  Feel free to share your thoughts, tips, questions, and comments below.