Why You Should Teach Your Kids Money Management

kids money managementParents want the best for their kids and strive to provide all of the advantages that money can buy. One often-overlooked need is for children to learn how money is earned and how best to manage their resources. This can leave them vulnerable to the traps of over-spending and borrowing too much. Parents can help their children learn to manage money as soon as they begin asking for things at the store.

They can then build on the knowledge gained to ensure their child’s future financial welfare, and teach them about everything from saving allowance money to the best types of jobs to start thinking about, anything from medical school at Sanford Brown to law school at Harvard. Here are some ideas to start you off:

The Power of Choosing

Teaching children to choose carefully helps them to respect the value of money. Kids are not born understanding that money has to be earned and the parent has a limited supply available. As soon as the child begins asking for things at the store, a wise parent can give choices. Would the child rather have a candy bar or a box of cookies for the same price? Instead of giving in to constant demands, insist that they make a choice of one item.

Let Them Earn Some Cash

Letting children earn at least part of their money helps them understand limits and privileges. It’s tempting to simply give them an allowance, but this is a chance to teach them the value of a dollar in ways most kids don’t understand. A good rule of thumb for an allowance is that it should be limited to about $1 per week for each year of age. Giving children the opportunity to earn extra money helps them to understand how a job works. The parent can then talk about how he or she earns money.

Teach Them How to Save 

Helping children save toward a larger purchase can teach them a valuable habit of setting aside part of their earnings. One way to do this is to divide the money into four boxes or jars. Label one jar for giving (about ten percent), one for cash (about thirty percent), one for mid-term goals (about thirty percent) and one for long-term goals (about thirty percent). Dividing the money this way helps them to see the advantages of saving.

Stimulating your child’s brain and helping them understand money is no easy task – but then again, not many kids (or adults, for that matter) can boast this. If it was easy, everyone would have a great handle on their money; the average household credit card debt and over spending habits in America reveal that many people still don’t how to handle their money.

Teach your kids today. You don’t even have to be an expert yourself – educate yourself, then teach your kids what you know.

Photo by: roarpett