How to Teach Your Child About Money and Savings

by on March 11th, 2013
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Children are always asking for a toy from their parents when they go into the store. When they don’t receive a toy, they move onto wanting a book, soda or candy bar. At a young age, it’s difficult to teach children the value of currency, but as they grow older, the opportunity becomes more relevant. Parents find more occasions where they are able to work this lesson into their child’s education. If done wisely, the child will grow into a smart investor, learning to spend less and save more. If it’s done with discouragement, the child may struggle with their finances. Which way are you teaching your children?

First, start your children off with an allowance. This can be started when they are young and become more monetary as they grow older. For instance, start the younger children by picking up their toys in their playroom. They may earn a quarter or fifty cents each time they complete this chore. Explain to the children a percentage of their chore money will be saved in a piggy bank. Allow the child to put the coin in the bank so they can hear the coins drop; they will get more excited and look forward to helping Mom and Dad more often.

When a child is old enough to understand currency values, take them with you to your family bank. Open up a savings account with their name on it and start paying them in a way which money can be saved. For instance, let’s say a child gets $8 a week for chores. If they saved $4 every week, they would have $240 by the end of the year. The parent has to instill values in the child this money is only for emergencies or for college when they get older. Otherwise, there won’t be any money within the account.

Furthermore, take advantage of seasonal opportunities for your children. For instance, if you’re having a garage sale, suggest they sell lemonade to your customers for 25 cents a cup. This will not only teach them social skills, but it will teach them how to count money. Stand beside them and watch them count the correct change and give them tips on how to straighten the paper currency. Another way for them to earn money is to wash cars or sell popcorn, perhaps at church or school events. Again, encourage them to save a percentage of their earnings or this may defeat their savings plan.

Another way to teach your children about money is to not be a handout. Each time they need money for an evening out with friends, a movie or another purpose, extend their allowance once but not again. This will teach them they have to earn their money through working for it. It’s going to make them more responsible and not as dependent on their parents. Years later they will thank you for holding steadfast and not raising them spoiled.

In addition, don’t be afraid to let your children indulge once in awhile in the store. Remember, you are not raising the future Donald Trump. Allow your son to buy the Playstation 3 game or your daughter to buy the newest Bratz Barbie doll. They’re going to want to save their money, but not if their parents don’t let them spend any money at all. If they don’t have enough money, they may have to wait until the next week to earn more money. If you bail them out, they’re going to expect you to do it every time.

Next, teach your children about “needs” and “wants” in the watered-down kids version. For instance, explain to them that they may want roller blades or a new skateboard, but there are necessary needs that have to be met first. These needs are such things as clothes, food, water and a warm house to sleep in. Teach them with play money, or Monopoly money, about how realistic rent and college costs may be. This will give them a realistic expectation of what they will have to pay for as they start to get older, and in the long run, they will appreciate the lesson.

Another way to teach children about money is to have family discussions. Money often seems like a dirty word to most families, but it’s something that should be out in the open. Encourage your children to come to you about anything from their savings, questions about the economy or whatever else is on their mind. Set aside specific time with each child to have a money discussion and teach them about checks and credit cards. The more informed they are from their parents, the more prepared they are going to be when they have to face the real world.

Finally, t each them wisely and be sure to follow those same guidelines. Your children’s eyes are on you, and they’re going to question if you go beyond what they have been taught. This may discourage them from saving money. The purpose of teaching your children about money is to help prepare them for their future. Budgets, savings, checks, credit, debt — they’re all important. Do all these make it into your family discussion? Children need to be informed because the world may not be a welcoming place without this vital skill.

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