Connecting kids to financial management skills now, can provide the building blocks for financial responsibility later in life. Here are some tips.
Pay an Allowance
If your kids don’t have money of their own, they could have a difficult time grasping where money comes from or why it’s valuable. Consider ways for kids to earn money for routine chores around the house.
Before paying the allowance, sit down and set expectations. Discuss the specific chores and timelines for completing those chores, the amount of money they’ll earn, and what day is “pay day.” This helps instill a strong work ethic as well as drives home the message that money is earned and not just a gift. Also reiterate that everyone must pitch in to keep the house running smoothly, so not every chore or action they are asked to complete will come with payment attached.
Teach About Savings
Consider implementing a savings rule. For example, for every dollar earned, 20 to 30 percent should be saved for the future. Talk about saving for a specific purchase (like a bike) or simply for unexpected expenses later.
A trip to the bank to establish their own savings account is a rite of passage children won’t forget. Or, if your children are still young, you can decorate a jar to use as a special savings bank at home. Once a month, sit down with your kids and count how much they have deposited and how much they have in total as a result.
Lessons for Shopping and Credit
As you go down your shopping list, ask kids to help you compare prices on different brands, sales and quantities per package. You can also have your children try to keep a running tally and make a guess of what the total cost of your purchase will be.
Once your kids have a sense of money matters, you may want to take the lesson up a notch. For instance, when your children need new school clothes, test giving them the money (or a store gift card) and put them in charge of what they buy.
As they shop, gently help them compare the prices and number of items they can purchase within their budget. This will help them not only learn about making smart purchases, but also introduce them to the credit card system, in which money may not seem real because it’s unseen. In today’s electronic financial world, this lesson will become more and more important as your children get older.
At times your children may beg for an exception. But by being consistent with these lessons, kids are better prepared to deal with common financial situations when they grow up.