Helping your children learn to manage money at a young age can provide them with a solid foundation and teach them the true value of money. Remember, teaching your child about finances at a younger age will provide them with a better understanding of the role that money plays in their everyday lives. If you are looking for ways to help your children start managing their money, consider the tips listed below.
1. Be a Good Financial Role Model
Children learn best by modeling the behavior that they see from their parents. This means the first step is examining your own attitudes about money and how you handle it, especially in front of your children. Always be mindful to set a good example and make sure to take advantage of teaching moments that you encounter along the way.
2. Provide Your Child With an Earned Allowance
Your child needs to know that they receive money by working for it. For younger children, you can provide them with an allowance for simple tasks such as making their bed, clearing their dishes, etc. As they get older, you can assign them more difficult household tasks. This allowance should be their spending money, and they should be allowed to spend it on what they choose. Use the allowance as a teaching tool and let them know if they plan for what they want, they can save up their money and buy it.
3. Help Your Child Start Their Savings
A crucial part of learning to manage money is understanding the value of savings and how to save to meet your wants and needs. Teaching your child to put their money aside to build until they have what they need to to make their purchase can not only show them how saving their money can result in them getting what they want and need but also teaches them patience and discourages impulse spending.
4. Teach Your Child About Credit Early
Credit problems are one of the biggest financial issues that young adults have to deal with. This is often due to a lack of understanding of how the credit process works. When credit is misunderstood, it is often viewed as free money, and young adults fail to realize how much it costs them both regarding their ability to borrow and how much they will really end up owing. When your child enters their teen years, considering loaning them money for something they need. Then structure a repayment schedule as a deduction from their allowance, having them also keep track of the balance each week until the debt is fully paid.
5. Show Your Child the Benefits of Being a Wise Consumer
One of the biggest parts of managing money is controlling spending. This can mean making the best choices when it comes to making purchases and also deciding whether or not the value of the item is worth it. When your child wants something, discuss with them if they think they need the product or will use it for a while or see if they were perhaps just swayed by heavy advertising. The why behind a purchase is very important in determining if it is a wise purchase. Once they have decided the product is worth buying, help them to learn to comparison shop to get the best price.
6. Set Budgets and Stick to Them
While every parent loves to spoil their children, buying them what they want all the time is setting them up for failure in the future. You should always set budgets and limits when you can and stick to the budget so your child can learn to make choices and understand that staying in budget is important. Budgets can be used for special occasion outfits, back to school shopping, or when planning a party.
Even though it is your job to provide for the needs of your child, it is also your responsibility to teach them about finances and money so that they can have a successful future. By following the six tips above you can set a good foundation that helps your child understand how to manage their money as well as the importance of doing so.