Teaching kids the value of money early in life is crucial!
How early is too early to start teaching kids about the value of a dollar? Some think kids shouldn’t deal with money until they reach the proper age, but what is the proper age? Introducing money or the value of money to your kids now compared to later in life is a wise choice you will be glad you made. Explaining the difference between the things they want and the things they need will make a huge difference in understanding how money works.
Depending on how young you want to start is how you will proceed in teaching them. Different ages require different lessons, so stay focused and remember that with each passing year, the lessons will get tougher. Let’s begin!
Here’s where you can begin your lesson, right at home!
You and your spouse can decide on the age you start to give your child an allowance. Most start around 7 or 8 years of age and the amount you pick depends on you and a set of responsibilities created by you. They may include chores such as cleaning their room, sorting the laundry, helping clear the table or even picking up their toys around the house if they’re really tiny and cute.
Paying For High Grades In School
We’ve all done it, paid our kids to get better grades in school! Promising them a sum of money for getting that 100% on the math test or doing their homework daily. This encourages them to work harder to get what they want. The same rule will apply when they get older, the harder they work at something the bigger the reward. Well in some cases! Keep in mind that over the years, their expectation will change and you’ll have to change along with them. As they get older, you can rest assure that the price will go up! It will be a matter of time before your little one comes home to brag about his friends’ high allowance and requesting the same from you.
Open A Bank Account In Their Name
Opening a bank account in their name, with you or your spouse being the guarantor, if they’re not old enough is a great idea. This will allow them to see the actual dollar amount they have in the bank and they have saved all on their own. This will give them a lot of confidence. You can teach them about the savings book and how to properly record their transactions. The purpose of writing it down themselves for better tracking purposes or you can show them how to view this information online, but I doubt they’ll have a problem with that. In fact, they may teach you a thing or two, don’t be surprised!
North Valley Bank in Redding, CA partnered up with the American Bankers Association and created a program for the young adults. “Teach Children to Save” program and NVB’s bankers visit classrooms to make presentations on the importance of saving money. Check with your local banks for a kids program or you can also inquire with your local credit union, they are known to cater more to families and make the experience more personal.
Advise them of the risks involved when dealing with money over the internet. This allows some room for critical thinking and the skills they’ll need to secure their financial future once they’ve saved that money in the bank.
They will also enjoy and learn to love the process of learning about compound interest and how beneficial it is to save their money early in a bank account compared to saving it at home. The reward can be huge over time!
Long Term Saving
Showing your kids the benefits of long term savings will open their eyes to a world of security. Explaining to our children how the economy has changed over the last 10 years will probably bring too much confusion, but breaking it down to something simpler like showing them that a penny saved today is a penny earned tomorrow. Educate them on the proper way of saving money long term and how good it feels once you’ve reached your goal.
This will also teach them patience and working towards that huge purchase they’ve been asking for since Christmas.
Giving Back to Community
Teaching your children to always give back to their community is a lesson they’ll need to learn in order to be humble as a human being. This is a lesson you must teach early in life. Show your children if you can how lucky they are in life to have the things they have and allow them to see as difficult as it maybe seem the other underprivileged kids and hardship they go through and are still happy in life. This will build character! Teaching children that sometimes money is not as important as having good health, great friends and a caring family. Giving back to the community sometimes means no money for them, but the feeling they’ll get about themselves and what they’ve accomplished will be extraordinary.
In the past, once a conversation went in the direction of family finances, the kids were sent out of the room. Today, I don’t think it’s a wise choice to send the kids away. Allow them to hear the hardship you and your family are facing so that they get a clear picture of how hard it is right now and why you just can’t buy them the toy or game they want. This doesn’t mean your kids should hear every conversation that takes place between you and your spouse, but allowing them to participate in some discussion will give them a sense of pride and way they can contribute to it.
Investing For Their Future
If your kids are older and understand the concept of investing their money, allow them to do so. Give them the freedom to choose how they want to invest their money, but guide them and teach them about how investments work and what they represent for their financial future. A great place to start investing money is in a Roth IRA. You can get additional information at your local bank.
Kids are very impulsive and don’t understand the concept of bargain hunting. You will need to step in sometimes and prevent them from making an impulsive purchase because you know you can get it someplace else much cheaper. Teaching your children to shop around and not make impulsive purchases will save them money for other purchases they want to make.
If your child is old enough to work and make their own pocket money without any contribution from you, that’s awesome! That’s show how much your involvement and great parenting skills have assisted them. Taking on a part time job and making their own financial decisions is the direction you want them headed. Don’t forget to include a lesson or two on paying taxes and how to look for that information on their first check so they’re not disappointed. If they’re working, they’ll be spending.
Encourage them to pay their debt in full in each month so not to pay those high interest fees on those credit cards because once they start to work, those offer will be coming in and offered everywhere. This is not a lesson I want my son to learn on his own the way I did. My first year in college, I got my credit card and went on a shopping spree thinking I can pay it off, but by the time I paid it off on my small salary, I had paid almost double in what I spent. Let your kids learn from your mistakes. It will take time, the younger they learn, the better off they will be.
Remember your kids will make mistakes along the line, don’t get upset but continue on your journey of educating and encouraging them on how to become financially responsible. Making sure they understand the mistake they’ve made and how to fix it in the future is vital, otherwise they’ll continue to repeat them. Allow them to feel secure to come to you in the event they need your help financially, however, motivate them so save on their own for that rainy day. Allow them room to build and secure their own financial future so not to depend on anyone else.
By: Ida L