Teaching Money Management to Young Children
As kids watch the adults in their lives use money, they catch on to its importance money has in life. The best way to instruct your child about the significance of a dollar is by showing them the many ways the dollar is used.
Begin When They're Young
Begin explaining to your child how money works from a young age. It's important for kids to know you get money by earning it. Items (or services) in life are given in return for money, and the value or worth of that item varies according to the seller. If you do not have enough money, you can not purchase the item.
Another good topic to cover is the importance of saving money. Let them know that a child with a two or three dollars could buy candy that will only last about 10 seconds, or even a cheap toy that will likely break in about 10 minutes or be forgotten about the next day. However, if that child saves the money, they can buy a better item that will probably have more value and last longer.
Have A Savings Plan
To develop a savings plan, help them decide on a percentage they can save each time they earn money. Ten percent is a good amount to work with since all they have to do is move the decimal point one place to the left. That will help them to see that for every dollar they earn, ten cents can be saved. You can also show the other examples too.
This savings isn't for a better short-term item, but for a "rainy day" or even a car or college fund. The remaining $0.90 can be used for the candy or "better item" as mentioned above. This principle can teach the child self discipline for very long-term savings (i.e. a house or retirement when they're an adult).
Sure, a six-year-old won't understand the "rainy day" concept, and driving in ten years may be discouraging. But after saving 10% over the years, it'll add up. This teaching is especially helpful when they get their first job and are already in the habit of saving that 10% for long-term use.
You can also share with them about putting some money to the side to give to a charity they are interested in. Concepts like this teach them even more about managing their money.
As Your Child Grows
When your child is older,take him or her to the bank with you and open savings account for them. Decide to take them to the bank monthly so they can deposit their savings into the account. Allow them to view the bank statement so they can see how money is grows with the assistance of interest.
Interest is a large part of spending and saving money. You will either pay more than what the item is worth or you can earn more money. Teenagers need to learn the concept that if you don't pay the debt owed within 30 days, they will pay more for the item they purchased.
A good way to prove how unfavorable or great interest can be is by role-playing. Find an item your teenager wants to use a credit card to pay for. Create a chart showing how making only the paying the minimum changes what the total debt is, how long it will take to pay the debt off with minimum payments, and how much interest (or money lost), is paid in total.
You can even switch it by taking the number of months it will take to pay off the debt verses the interest they would earn with a savings account if they save money for the item they want. The amount of interest may not be much, but you want them to see that if you save money to purchase the item, you pay only that amount and there will be no interest to pay along with it.
The purpose of teaching your child about money is to get them to see the value in proper money management.
Begin When They're Young
Begin explaining to your child how money works from a young age. It's important for kids to know you get money by earning it. Items (or services) in life are given in return for money, and the value or worth of that item varies according to the seller. If you do not have enough money, you can not purchase the item.
Another good topic to cover is the importance of saving money. Let them know that a child with a two or three dollars could buy candy that will only last about 10 seconds, or even a cheap toy that will likely break in about 10 minutes or be forgotten about the next day. However, if that child saves the money, they can buy a better item that will probably have more value and last longer.
Have A Savings Plan
To develop a savings plan, help them decide on a percentage they can save each time they earn money. Ten percent is a good amount to work with since all they have to do is move the decimal point one place to the left. That will help them to see that for every dollar they earn, ten cents can be saved. You can also show the other examples too.
This savings isn't for a better short-term item, but for a "rainy day" or even a car or college fund. The remaining $0.90 can be used for the candy or "better item" as mentioned above. This principle can teach the child self discipline for very long-term savings (i.e. a house or retirement when they're an adult).
Sure, a six-year-old won't understand the "rainy day" concept, and driving in ten years may be discouraging. But after saving 10% over the years, it'll add up. This teaching is especially helpful when they get their first job and are already in the habit of saving that 10% for long-term use.
You can also share with them about putting some money to the side to give to a charity they are interested in. Concepts like this teach them even more about managing their money.
As Your Child Grows
When your child is older,take him or her to the bank with you and open savings account for them. Decide to take them to the bank monthly so they can deposit their savings into the account. Allow them to view the bank statement so they can see how money is grows with the assistance of interest.
Interest is a large part of spending and saving money. You will either pay more than what the item is worth or you can earn more money. Teenagers need to learn the concept that if you don't pay the debt owed within 30 days, they will pay more for the item they purchased.
A good way to prove how unfavorable or great interest can be is by role-playing. Find an item your teenager wants to use a credit card to pay for. Create a chart showing how making only the paying the minimum changes what the total debt is, how long it will take to pay the debt off with minimum payments, and how much interest (or money lost), is paid in total.
You can even switch it by taking the number of months it will take to pay off the debt verses the interest they would earn with a savings account if they save money for the item they want. The amount of interest may not be much, but you want them to see that if you save money to purchase the item, you pay only that amount and there will be no interest to pay along with it.
The purpose of teaching your child about money is to get them to see the value in proper money management.
About the Author:
Laura Nelson-Smith is the resident editor of Career & Finance at http://www.Schmoozins.com - an online magazine for women that gives all women a voice. Join us as a contributor, schmoozer or just hang out a while.
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5:35 AM
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