It is a very wise idea to start educating your kids about money when they are young. Of course we don't want to deprive them of anything, yet at the same time we want them to learn the value of money.
Many kids see money go in and out of their parents wallet and most don't know how it got there nor how quickly it can disappear.
Teaching your kids the value of money from an early age will only contribute to their success later in life.
Benefits of teaching your kids about money when they are young are that they will soon learn how quickly it disappears when it is wasted on non-essential items, how to spend and save it wisely, understand the habits of wealth and help them to make better choices in life.
If you are an extravagant shopper yourself or are wasteful with money, it does not set a good example to your kids on how to manage money. You cannot complain when they are in their teens or adult life if they keep finding themselves in financial difficulty if you have not taught them well.
It is not up to our teachers in schools to teach kids all about money and how to manage it. The responsibility lies with the parents or the minders of kids!
Ways to teach your kids the concepts and vocabulary about money are:
- Always provide your kids with the essentials to cater for their needs. Then give them an allowance for a week or month (week for a younger child, month for older children) and allow them to budget and decide how they spend their allowance over the period.
- Provide opportunities for your kids to earn money for their savings. Encourage them to work for it so they see that effort is needed to create wealth and that you have to earn money. Form a young age, offer payment for "extra" work around the house and yard. For teens, encourage part-time or some holiday work.
- Teach your kids to break down their finances into categories or pools for which they contribute for different purposes. Establish a saving system with your child with some short term and long term savings. eg: $2 set aside for charitable contributions/church, $2 investing (stocks, bonds, mutual funds), $2 savings for a short term goal like a toy, $2 savings for a long term goal like a swimming pool or college fund, $10 spending on incidentals like the canteen. Make sure they have a piggy bank and savings accounts.
- Show your kids a family bill, for example an electricity bill. Set a task to see if you could work together for a month to cut back the bill from the previous month. Make more effort to turn lights and television off when not in the room. There will be great anticipation to see the next bill. Show them how money compounds and grows.
- Teach about money in everyday activities, for example when a child breaks a toy they bought themselves, they realise the true value of money if they wish to replace it.
- Play money games such as "Monopoly" to help learn money terms and vocabulary.
- Learning not to spend their savings wastefully will be an important lesson.
- Kids will feel proud and enthused by their own efforts to save. Offer praise, encouragement and congratulate them.
- If kids really want something big and exciting (that is costly too) for example a trip to the theme park, new plasma TV, or swimming pool, set up a fund for which the whole family can contribute. A jar in a secure place to put spare coins in may work well.
Regularly track the savings to spur on the enthusiasm. Work together and set goals as a family to earn the funds and feel the sense of pride once it is achieved. Kids will learn the responsibility, perseverance and hard word required to buy such luxuries.
By using some of the above strategies, kids will see the benefits of investing and saving. Teaching them to not always expect money from others will help their relationships throughout life. We are teaching them that they too need to take responsibility if they are to cater for their needs and wants.