Teaching kids about managing money at a young age can lay a solid foundation for their financial future. Schools rarely find the time to teach younger children to save money and the value of sound personal finance. As a parent, that responsibility lies solely with you.
Contributed by David Bakke, Money Crashers
It’s typically not treated as such, but sitting down to explain the red and black can be just as important as the birds and the bees.
For those parents who have young children at home, use these five tips to introduce them to the overall concept of money and how it works.
No, not like KC and The Sunshine Band. Instead, speak to your children on their level — literally. When you stand above your children, as parents usually do, your words can seem like imperatives and instructions. In this case, however, you want to have a dialogue with your kids in which they feel like equal participants. Clear an area on the floor, sit with them face to face and engage them in a discussion. This may seem like a minor point, but it can go a long way in getting your kid to understand the content of what you’re saying.
Use specific examples
If you’re currently in credit card debt, use your own statements to explain the principle of interest accrual and to show your kids the cost of carrying high balances. At the end of the day, your children are going to gain a more concrete understanding of the unnecessary expenses associated with carrying a balance, and you might find yourself more motivated to do something about it yourself.
Show them when you save money
When you’re out and about with the kids, go for that sale item instead of the full-price option. Even if you’re just driving by gas stations to find the cheapest fuel, tell them why it’s important. Get them to clip coupons with you and after you go shopping, show them the receipt to highlight how much you just saved. Children at an early age won’t learn the myriad ways to save unless you educate them.
Give them a budget
We can probably all agree that what young kids want most are toys, toys and more toys. Instead of making haphazard trips to the toy store several times per month, give each child a budget. Set it at $20, $40 or whatever works best for you. Then, give them the reins and let them decide how to spend the money. I did this with my son at one point and he took great care in purchasing his toys, making for a much more valuable play-time experience every time he brought them out of the closet.
Motivate them to save
One of the best ways to show your children the power of saving is to open up a bank account for them. You may have to put it in your name to begin with. But even if you open your own and assign it to them — or simply open one at an imaginary bank — it’s a great way to motivate them to save that modest cash gift they received at Christmas instead of blowing it on bubble gum. Plus, once you introduce your kids to the inside of a bank and how it works, they may want to go there more often — and not just for the free lollipops.
Once you’ve done all you can, take a good, long look at your own financial situation. Are you saving as much money as you can? Do you have a plan in place to get your credit card debts paid off? Teaching your kids about prudent money management is of great value both now and in the future — just take a look in the mirror and make sure you’re setting a good example for them as well.
What ways can you think of to teach your kids about money?
About the author:
David Bakke is a father of a young son in Atlanta, small business owner, author and contributor to the blog, Money Crashers PF.