4 Things they should know
Money makes the world go 'round. The sooner you begin teaching your kids about money, the better. Of course, they won't be ready to learn the ins and outs of investments at age five, but there are plenty of other lessons you can teach as their understanding and intelligence mature. Here are four key things to teach your kids about money in order to set them up for a smart financial future.
1. Money comes from work.
You want your children to understand that money does not grow on trees; it has to be earned. Of course, you can teach your child this lesson just by being open with them about the fact that you work, and in exchange for your work, you get money. Let them watch you spend cash at the store, and mention that you were given that cash by your boss because you went to work.
As your child gets a little older, you can start giving them an allowance in exchange for chores. Try connecting their earnings to specific tasks. For example, you can give them $1 for washing the dishes and another $2 for watering the garden.
2. Every coin has value.
These days, you may do a lot of online and virtual banking. But it is still important for your kids to learn the value of each coin and dollar. Give them their allowance in cash, and guide them through spending that cash at the store. Help them count out the necessary coins and dollars to buy the items they want. When they are given change, help them count that change, and explain why they received back a certain amount.
3. Spending should always be balanced with saving.
Saving is key to a smart financial future, so you want to introduce this concept early when teaching your kids about money. Give them a piggy bank, and talk to them about putting a certain amount of money in savings each time they earn an allowance. Help them set savings goals, too. For example, if they want a certain game, you can look up the price of that game with them. Then, help them calculate how much they need to save each week in order to afford that game after a certain period.
As your child grows older, you can teach them about saving for events even further in the future. You may want to help them put 20% of their money in a savings account for college, for example.
4. Budgets are essential.
When your child is about 10, start introducing the concept of a budget. A good starting point is to let them see your budget. Show them how you record the money you earn each month, and then how you plan for the various expenses you have throughout the month. This will give your child a true grasp of how much things cost in the "real world."
You can also help your child make their own budget. At first, it might be really simple, but as they enter their teen years and get a job, start saving for a car, and start paying their own phone bill, budgeting can become a more intensive exercise that you guide them through.
As you start teaching your kids about money, they'll make some mistakes, but that's okay! Another important money lesson to learn is that mistakes happen. And when they do, you pick yourself up, learn from your mistakes, and try to do better the next time. With these lessons in their back pocket, your child will be prepared to make smarter financial decisions later in life.
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