It’s vital that children learn about money at an early age. Teaching children about money gives them a better chance at a financially secure future. It is true that money isn’t everything. However, in today’s world it is important to have a good understanding of money in order to survive.
Begin to teach children about finances at preschool age. A good way to begin is to buy a pretend store set with play money. Put prices on the items for sale. Hand out a set amount of money. State that this is their pay for the week. Have them “shop” for food.
Play shopping teaches children that cash is not unlimited. It’s also a good way to learn to count money. They learn how to give change and budget the use of their money. Set up a play bank as well. Before they shop, they must put cash in their play savings account for other expenses.
Once children become school age, they’re ready to begin earning their own money by doing chores around the house. Open a savings account at this time. Teach children to put a portion of their chore pay in their savings account each week. A good amount to start with is 20%. Make it very clear that this money is absolutely untouchable.
Explain that there are things they’ll need in the future that savings can be used for. Any money which is not put into savings can be used to buy things they need or want now. Teach children to be careful with their money. Give them a few practice years for making mistakes and learning from them.
Do not rescue children from their mistakes. It’s tempting to look at tear filled eyes and give in. It’s essential to their education to allow a child to take a fall once in a while. This isn’t a fun part of parenting It is a necessary one. It’s better for kids to fail at money lessons now than later, when they’re facing adult issues like foreclosure and bankruptcy.
In addition to their regular savings account, teach children to save for goals like a new bike or other items that are not in your family budget. Put this money aside in a jar with the goal labeled on it. Encourage children to do odd jobs to earn money for the jar fund. They’ll soon learn that hard work pays.
Teach children to budget their money by keeping track of how it’s spent. If everything is written down it’ll be easier for them to track their mistakes and triumphs. As they grow older this habit can be turned into a valuable asset. There are many adults today who could benefit from a little record keeping.
Take children shopping. While you’re in the store, talk about how to find the best deals and the use of coupons. Teach kids to be thrifty in these areas, so that money will go further and last longer. Explain that if you buy the less expensive cereal, there’s a better chance of leaving the store with extra money to save toward a movie or other entertainment.
Product comparison extends to television commercials. Teach your children about false or misleading ads. Explain that advertisers are trying to sell their product and will use any method needed to convince you to buy it. Their claims may be inflated or just plain false.
Teach your children that it’s better to save money for large items than to take out a loan or use credit cards. Explain that this is because of the interest charged by the bank or credit card company. As a general rule if you can’t afford to save for it, you definitely can’t afford to charge it.
Credit cards are a valuable tool when used properly. They should be used for emergencies only or when this is the only way the seller will accept payment. Teach children not to charge anything that cannot be paid off by the end of the month. The majority of credit card companies give 30 days to pay without interest being charged.
Talk to children about keeping credit clean by paying bills on or before the due date. Today, your reputation revolves around your credit rating. Those with bad credit may be turned down for loans and even jobs or apartments. Maintaining good credit is an essential financial survival skill for kids to learn.