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5 Tips on Teaching Money Management to Kids

5 Tips on Teaching Money Management to Kids

By William Briat

Teaching young children how to manage personal finance can go a long way in ensuring that they are well prepared for living a financially sound life. While talking about money is not considered as difficult as talking about the birds and the bees, many parents still shy away from broaching the subject. Most parents think that their kids should enjoy their childhood freely and without any insecurity about money. While it may be a noble thought, doing this renders most children financially illiterate. They earn their degrees and work in corporate offices, but most of them have no idea of how to go about planning a budget when the paycheck arrives. This explains why many Americans today find it difficult to manage their debts. Therefore, it is increasingly important for parents to impart financial education to their kids.

A recent research conducted by Money Advice Service found out that children develop attitudes towards money by the time they turn seven. The report also stressed that the money habits of parents played a big part in influencing the children. Therefore, it is important that you view educating your children about money as a responsibility, and put in your best efforts to make them financially literate. The below mentioned points will help you in this endeavor.

  • Be a Role Model

Practice what you preach – it might sound clichéd, but its message can’t be more relevant for people who are trying to teach personal finance to their children. As mentioned above, children start getting influenced by the money decisions of their parents by the age of seven. So you shouldn’t assume that your financial decisions or the way you deal with your money won’t have an impact on your kids. If you want your kids to take you seriously when you talk to them about money, it is important that you set an example of managing your finances in a disciplined way. Also, if you are good at taking care of your finances, it will be easier for you to teach your children. You would be able to give them real-life examples and anecdotes about how you saved up or invested to buy things later.

  • Firsthand Experience

Give your kids the freedom to learn the value of making financial decisions. You can do this by giving your kids an allowance with the condition that they will have to manage with that money for a stipulated time, say a week or a fortnight. You have to be clear with them that if they blow all of it, they will have to manage without any money until the stipulated time is not over. This way you will help your kids in learning how to stay within their budget. If they make mistakes by spending it all on a new toy or clothing item, you need to ensure that you don’t give in to their pestering and dole out another allowance.

  • The Importance of Money

The whole idea of talking to your kids is to show them the importance of money. When we were kids, we were not sure about why our parents did things in a certain fashion. Why did they continue to watch that old TV when everyone had a new one? Why did they continue to drive that old car when there were so many fascinating cars around? I guess, one of the main reasons why we did that was because we failed to understand the importance of money. We failed to understand that it is earned when someone toils hard for 5-6 days a week. To make our kids understand the value of money, it is essential that we instill in them the virtue that money is earned by working hard, and it should be respected for playing such a vital role in our lives.

  • Saving and Investing

The weekly allowance that you hand out to your kids can also be used to build up substantial savings. The idea is to educate them that saving religiously over a period of time can give them a sense of security and achievement. After the kids have saved a good enough amount, you can steadily introduce them to the world of investing. The earlier they grasp the tenets of saving and investing, the better they will be poised to manage their financial lives later on.

  • Make Learning Interesting

All the talk about teaching your kids the value of money and personal finance will be a great bore if you do not make it entertaining. Therefore, it is pertinent that you look for interesting ways to teach your kids. Teen books with a message about personal finance, cartoon clips that talk about managing money, and financial apps – all these can make your job easier as a parent, while making it entertaining for the kids to learn about money.

William is a finance blogger, freelancer and copyright editor from NY. Check out my site at Daily Gains Letter

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