Research shows that youth in America have a lack of understanding when it comes to proper money management skills. Teaching kids how to appropriately manage their finances is essential so they have the necessary tools to become financially responsible adults. Below are tips to help teach children about appropriate money management.
Use Cash - It may be true that credit and debit cards are more convenient to use, but children pay attention to how adults manage their money. Using plastic doesn't allow them to see the actual interchange of money for purchases. Let the kids see that in order to make a purchase you have to hand over cold hard cash.
Don't Spend the Money As Soon as You Get It - Always lead by example. Before you go shopping always create a budget, spell out what you intend to buy and compare prices of each item. Teach children that it pays to plan all your purchases before you buy.
Teach Kids About the Importance of an Allowance - Most allowances are tied to chores like making beds, doing dishes or taking out the trash. It's always beneficial to give them the opportunity to earn additional money for larger chores. However you chose to dole out the allowance, it's also important to accentuate that saving and sharing are just as important as spending. Teach kids to set aside money in their piggy banks or use a bank account to reserve portions of their allowance.
Bank & ATM Visits - Visiting the bank or the local ATM is a perfect way to explain where money comes from. Explain that banks don't just give out money but it's a place to keep the money they've earned. Call and arrange with your local credit union a tour of the branch to show how money is stored and dispensed. www.automatedmoneynow.com
Delayed Gratification - Teaching kids that good things come to those who wait will help battle the buy now, pay later attitude. Always reinforce the idea that waiting pays off. This approach could help them ward off credit card debt later in life.
Brand Names Do Not Always Mean Better - Reinforce that it's not always beneficial to shop by brands. At the grocery store illustrate that generic products can save significant amounts of money for people on a budget.
Keep Track of Their Money - Show children the importance of knowing where their money is going. Have them keep track of their money in a notebook or on the computer. You can even make a file where they can organize their store receipts and bank statements.
Wants vs. Needs - At the center of any good money management program is the capacity to differentiate between wants and needs. This realization will help build the groundwork for managing finances as an adult.
Build a Budget - Have your child sit down with you and generate a monthly budget. Explain the reasons to keep track of all monthly expenses and then see how much money is left over to either save or make a purchase they want instead of need.
Create a Wish List - It's hard for everyone to have priorities, so sit down with your kids and make a wish list of everything they want to do with their money. It will help to rank the items on the list by importance.
Games & Other Budgeting Activities - Games like Monopoly, Life and Easy Money are great ways for parents to practice money management skills with children. Research the Internet for other fun ideas and activities to promote children's financial literacy.
Make the Most of Their Savings - Present your child with different savings accounts that could earn them interest like CD's, bonds or regular savings accounts. Work with an interest calculator to show them how their money can grow over time with basic monthly interest. I'm sure they will be amazed.
Sound money management is a life skill you can teach your children, especially when they are young. Using yourself as an example is very important as they engage what's going on around them. Make sure your lessons are age appropriate in an effort to lay a solid foundation for good money management skills as they grow into young adults.