Teaching kids sound money skills in today’s world is not easy.
From their earliest days they see money pouring out of a machine and their parents handing over a plastic card to obtain whatever they want. The thought as to where it all comes from is unlikely to cross their minds unless they are trained at an early age.
Some children like to hang onto money when it comes into their possession – others cannot spend it fast enough. Whilst teenagers and young adults can enjoy their money, if they are not taught to manage it effectively from a young age, they are highly likely to have problems when it comes time to handle adult responsibilities.
So how do you teach them?
The answer is to start early and be firm. Children who get everything they ask for will never learn the value of money.
As soon as they are old enough to understand, say five years old, children should be given a basic weekly allowance– something the parent can easily afford - for completing an easy, daily chore. If the allowance is spent they get no more for the rest of the week. As they get older, the amount should increase in line with extra responsibilities to be fulfilled. This not only establishes early money skills, they also learn the responsibility of completing a task to earn a reward.
Other ideas you could try include:
- Talk to your children about money – discuss saving for particular goals. You may wish to match their contributions dollar for dollar to keep them motivated.
- Let them make their own decisions – they will learn a good lesson by spending their money on something frivolous and then being unable to afford something they really want.
- Set up their own bank account – even if they have little to start with, they will learn about saving by watching it grow.
- When they have allowed their savings to reach an appropriate level, help them choose an interest-bearing account – and teach them the value of compounding interest.
- When they become teenagers, give them a clothing and mobile phone allowance they must manage responsibly.
Being tough with money in the early years may create a few complaints but hopefully your children will thank you for it when they become adults; particularly when they are ready to buy cars and homes, and are raising their own children.