It is the responsibility of every parent to teach their children about money. Making your kids understand the value of a dollar is the best way to prepare them for the responsibilities that lie ahead.
Your children’s financial education will change as they grow and age, with different lessons being taught at different points in their lives.
Below, you’ll find five ways to teach your kids about money.
1. Work And Reward
When your child is very young, a simple work and reward system will teach them how to earn money. Give them simple tasks, such as chores around the house and reward them with coins for their piggy banks. Very young children can do a variety of tasks, such as putting their toys away, folding towels, or helping dust furniture. The chores should be age appropriate as should be the reward. While a nickel per task is plenty for a toddler picking up their toys, teenagers will require a heftier payment for more involved work, such as washing the car.
2. Savings Account
Once your kids have mastered earning money, it’s time to teach them about saving money. Take your kids to the bank and open a savings account, then take them back to the bank once a month to deposit their chore money. If your kids have a habit of spending their money before they can save it, try having them deposit their money in a locking box, to which you hold the key.
3. Teach While Shopping
You can also teach your kids about money while shopping at the store. Whenever they ask for a toy or special treat, have them think about how much it costs in terms of how many chores they would have to do to earn it. Try phrasing your response like, “That toy boat costs a lot of money. You would have to put away 25 toys to earn that.” If your child still insists on getting the boat, tell them they need to earn the money before they can buy it and they will have an opportunity to do chores when you get home. Often, your kids will find that they don’t want the toy as badly once they are out of the store. This doubles as a lesson about impulse buying and self restraint.
4. Use Cash
Use cash when you go shopping, so your kids can experience handling and counting actual money. Schools are slowly phasing out children how to count money and make change, so it’s up to you as a parent to make sure your kids understand basic concepts about finances. Give them chances to count and handle money in real life situations so they can learn valuable financial skills.
5. Teach Them About Credit Cards
When your kids are teenagers, talk to them about credit cards. You need to make sure to get to them before the credit card companies do. Make sure they understand that credit card purchases represent real money. Teaching your teenagers about credit cards will help them make good choices as adults. You can further press the lesson by creating an invoice of items they ask you to buy and presenting them with the invoice at the end of the week or month to be paid for with their allowance money. This way, they will gain experience and understanding, without the potentially devastating credit implications of learning with a real credit card.