Some parents may think that the subject of money is only for adults. If you are that parent, you need to change your mindset and involve your kids in matters to do with money from an early age.
Financial education helps the children grow with a healthy mindset about money, spending, and other important aspects of money. In this article, we will discuss how to help kids understand money and the benefits that come along with it.
Give an Allowance and Teach Them to Save
An important responsibility for parents is to teach children about money. The first rule, according to many researchers and financial planners, is that parents should give their kids an allowance. This sets up the all-important savings habit that will hopefully last a lifetime.
Parents should emphasize the purpose of an allowance by telling their child that it provides reimbursement for chores performed or a sum of money given to an older child for watching younger siblings.
For young children, an allowance may be paid weekly or every two weeks. As children get older, however, it’s best to switch to monthly allowances.
Engage Them in Part-Time Jobs
As children become teenagers, they might be expected to pay for certain expenses themselves. If the amount of allowance is not enough to cover these expenses, parents could consider giving teens part-time jobs.
This exposes the kids to the practice of earning money from their work. Such jobs also introduce the idea that income from work is necessary for life’s goals.
Teenagers might be expected to pay for clothes, entertainment, gifts, or school expenses with their own money, as long as they know how much this requires in terms of a weekly allowance and part-time job. This is valuable since it teaches them to be responsible and accountable.
No Purchase Policy
Some families establish a “no purchase” policy. For example, each child might be allowed to purchase one pair of expensive sneakers, but after that, the children are responsible for buying their own shoes.
This will also make them understand what it takes to buy expensive items and this can teach them to be economical with their finances.
Some families require children to save part of their money for future goals, such as college or their first car. This is called “forced savings” and works well only if the child has a spending problem. In this case, saving for college or a car should not include money from part-time jobs.
In summary, the most important lesson parents can teach their child is that money doesn’t grow on trees and it isn’t just handed out every week. Parents should also teach their kids that money doesn’t buy happiness, but it certainly makes life easier.
And when children learn these lessons early in their lives, they’ll be prepared for the inevitable day when they have to support themselves.