Have you ever wondered why most adults seem to cringe whenever a conversation about money is started? The fact is that many adults are never taught how to manage their finances effectively. Resulting in a generation with tons of credit card debt, poor credit scores, and little to no retirement savings. Fortunately for us, there are now tons of resources available to help us guide our children in developing proper spending habits. See below for my best mom-tested ways to teach children about the world of money!
- Fun & Games: There’s one thing for sure and that is that kids love to play games! Take advantage of your child’s playful nature, and use games as a way to teach them about making smart financial decisions. Classic board games such as Monopoly, The Game of Life, and Payday all use play money to teach children about the concept of income and expenses. In addition, these games are a great way to reinforce math skills such as addition and subtraction. Or, if your child is like the millions of others with a cell phone, tablet, or MP3 player, download educational apps like Virtual Piggy Bank, Kids Money, and Allowance and Chores Bot where kids can learn lessons on identifying coins, counting money, creating and tracking savings goals, and weekly allowance tracking. They will enjoy learning about money so much that they will forget they are even learning.
- Get A Job: One of the best ways to teach a child about money is to teach them ways to earn money. Give your child an age-appropriate set of tasks that are to be completed each day or each week. Assign a dollar value to those tasks and designate a specific “payday” for children to receive their weekly allowance. Children as young as toddlers can help the family around the house. For younger children, their “chores” should promote independence and will most likely center around self-maintenance including tasks like potty time, teeth brushing, and completing preschool work. School-aged children can help with many things like laundry, preparing lunches, and feeding family pets. If they do not complete their chores prior to payday, then they do not receive their allowance. Reinforcing this rule teaches that hard work and consistency is rewarded while a lack of effort is not. If you are not keen on an allowance, try encouraging your child’s entrepreneurial spirit and help them begin their own business. Babysitting and selling handmade goods are two great ways for minors to earn money.
- The Rule of Thirds: The next best way to teach a child about money is to teach them how to spend it when they earn it. When I was growing up, I was always told to save half and to spend half. And while this was a great strategy, I always felt as if it was missing something. It’s important to make an effort to help those in need and I wanted my financial goals to reflect that principle. Therefore I began teaching my children the Rule of Thirds – save, spend, and donate. Whenever they receive cash for holidays or birthdays, have your child split their money into three groups. The first group to save for future goals and investments such as a college education, the next group to spend on current needs and wants, and the last group to donate to a charity of their choice.
- Budget: After your child has allocated their money, they will need guidance in how to manage what they are spending. Maintaining a budget is the most effective way to determine if you are spending appropriately. It does not need to be as detailed as the multi-page budget document you may hand in to your accountant each year, but should be something easy to track and view. In fact, you may want to choose just one category to track. For example, if your child likes puzzles, designate a certain amount each month that can be spent on puzzles. Create a colorful chart or purchase a notebook for your child to track their progress towards their goals. Be sure to explain the consequences for going over budget.
- Field Trip: Take a trip to the local bank and allow your child to see how a financial institution operates. Check with your local bank and see if there are any educational programs for children. Some banks hold workshops or have educational resources that you can use to teach your child about finances. And, while you’re there, go ahead and open your child’s first savings account. Most banks will allow a minor to open an account with a parent or guardian signature. Be sure to research savings account options ahead of time and let your child be involved every step of the way.
Do you have any suggestions? Share them below!