In order to raise financially savvy children, parents must begin to teach them a variety of skillsets like budgeting, planning, earning and saving. In addition to providing them them an understanding of the value of a dollar, teaching children about money management helps prepare them for life in the real world. Money management is an important life skill and many believe it’s never too early to teach kids basic economics. Here are a few lessons to begin teaching your children about money.
Make it Fun
According to U.S. News and Money, children as young as 2 or 3 years old can start learning to count and sort, making this is a great age to introduce real currency and teach them the name of each coin. Have them stack up the coins by size and even create a play store where the child pretends to shop and hands over money to pay for their items. You can also encourage saving at a young age by rewarding them for doing so, either by matching what they put aside or agreeing to put something towards it. If they pay for something with pocket or birthday money, they will know exactly what they’re getting for their cash.
Teach Them to Budget
It may not always be our first choice to take our children shopping with us, but it’s an excellent opportunity to educate them about the value of money and “needs” versus “wants.” Next time you take your kid shopping, allow them to have a “treat budget.” Before you head out to the store, explain that they have a few choices regarding how to spend their money: Save it to use another time, divide it up to spend throughout the day or choose to spend it all at once. It is especially important that parents stick to their guns and not give in if their children exceed the budget.
When a child is about six or seven-years-old, many parents decide to give their children an allowance. According to Money, 70 percent of kids in the United States receive an allowance, which is up from 47 percent in 2013. A lot of parents struggle with whether to just give an allowance each week or to make their kids earn it. Some would argue it is best to not tie regular chores to the allowance and reinforce that being part of the family requires doing some tasks for which they will not be compensated -- such as keeping his or her room clean.
Regardless of how you choose to dole out the allowance, the most important aspect of an allowance is teaching them values pertaining to how much allowance goes to spending, savings and even charity. Children will likely learn to appreciate watching their savings grow for a future goal as well as the joy of watching how their money can be used to help others.