Parenting tips to help teach the critical ABCs of money management starting when our kids are young!
Do you feel like you are your kid’s ATM machine?
Does your child spend faster than he saves?
Do you worry that you’ll still be delving out an allowance to your child when he is forty-five year old?
If so, you’re not alone.
Some of parents’ biggest concerns center around their kids’ inabilities to handle money and it is a legitimate worry..
How a child learns to save and spend in those early years has enormous impact on his future success. And research also shows we’re not doing such a good job in teaching our kids basic money management skills.
Consider these facts about our kids spending habits:
Scathing Stats About Kids’ Spending Habits
180,000 U.S. kids aged 18 to 24 declared bankruptcy last year
Fewer than 1/2 of parents surveyed said they teach their 11 to 14-year-olds how to keep track of their expenses or set a budget
One third of 12 year olds don’t know that paying by credit card is a form of borrowing (unless you pay your bill in full every month).
Four out of ten 12 year olds don’t know that banks charge interest on loans
The truth is we can begin to teach our children money management skills as early as three and four years of age, and those lessons don’t have to be difficult. In fact, the best way for kids to learn them is by taking advantage of those simple everyday real life moments like watching us at the ATM machine, paying our bills, balancing our checkbook, deciding our money budget, talking through our spending decisions.
Those lessons will take a bit more patience and persistence, but learning positive spending habits, financial wisdom, and good money management skills are crucial for life. And that’s exactly why we must parent for this kind of change.
Here are simple solutions to help your child learn good money management habits to give him a more financially secure future.
Explain How Money Works
Start money lessons when your kids are young. Take them with you to the bank so they see you have to put money in to take money out.
Let them play store with toy cash registers and play money.
Put price tags on household items then help your child figure out the cost to “purchase” each item.
Give your preschooler a clear small jar (baby food size) that she can save coins and “watch them grow.”
Stress that she can buy something special when the coins reach the top. Let her do simple spending at the store where she has to count out the correct amount for the candy or inexpensive toy.
Use Real-Life Examples
Take your child to work. Show your daughter how you balance your checkbook.
Talk to your son how your credit rating is checked before purchasing that car.
Show your kids the household bills so they know how much electricity, gas, water, phone and cable cost.
You don’t need to reveal your income or savings but you should use real opportunities to help your child understand money.
Don’t Give Loans
Kids learn money management by trial and error. So don’t bail her out if she “overspends” and runs out of money needed that week for the movie. So be it!
If you do give an advance, consider charging interest. She’ll soon figure out that borrowing is pricey. You can discuss pay for extra jobs, such as mowing the lawn or washing the car, especially if the child is saving for a big or special item.
Set a Capped Budget
Allocate a certain amount for expenses like a back-to-school wardrobe. As an incentive, explain that if there’s money left over she can pocket it.
Make your kid contribute to those nonessential “have to have items” like the trendiest sneaks or those pricey jeans. You can pitch in some, but he has to make up the rest.
Give an Allowance
One of the best ways for kids to learn to manage money and keep a budget is by giving allowances.
Some money experts say an allowance should start when a child is old enough to count, stop swallowing money, and listen to talks about money. Others say it is wiser to wait until school age when kids are more mature. How much to give depends on your child’s spending habits and maturity, and your comfort level.
Studies show the more materialistic the kid, the less likely he has a savings account.
Here are ways to help kids fight their spending urges and learn to save. Decide on which is the best approach for your family, and then stick to it.
- Share some. A portion of his allowance goes to a charity his choice.
- Fill a piggy bank. It must be filled or weigh a certain amount before money is spent. Clear jars are best because the kid can “see” her money add up.
- Give smaller denominations. Give five one dollar bills instead of a five dollar bill; break a dollar into four quarters. Offers denominations that support savings.
- Open a savings account. She can monitor her money just as in the real world.
- Give an incentive.Match a portion of your child’s savings with a set contribution (one to ten; fifty-fifty).
- Set a savings goal. Encourage her to save up for a long-range goal (a car, sports gear, a stereo, a college fund).
- Use jar savings technique. Give your child four clear jars: one for everyday spending, one for a short-term goal, one for charitable or religious giving, and one for long-term savings. Then help him figure out how to distribute the cash. A younger child can start with two jars : half for spending and half for saving).
Keep a Spending Log
From the time your child can write and count, give him some kind of a simple recording book to keep track of his money. A young child can track his earnings (including holiday money gifts); an older child can record his earnings and expenses.
Gradually explain the “break-even point” so your older child begins to learn the necessary skills for balancing a checkbook, keeping a savings account and maintaining a budget.
Encourage an Entrepreneurial Spirit
Help you child: Set up that lemonade stand. Print flyers that say he’ll mow the neighbors’ lawns. Offer to baby-sit. Walk the neighbor’s dog.
Your child can learn from a young age that how you earn money is through hard work.
Not only will you encourage your little entrepreneur but you’ll also help him appreciate the value of money!