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If parents want to give their children a head start in life they should not only plan financially for their future, but should take time to teach the children how to handle money. Along with the life lessons you offer – don’t talk to strangers, brush your teeth, etc. – it’s just as important to teach them about finances and how to manage money. There are many age appropriate ways to teach your children not only the value of a dollar but to save for a rainy day.
Here are a few things to take into consideration when teaching your children how to get a head start on managing money, from their piggy bank to bank accounts as they get older:
- Your kids should have “jobs.” While you’re not going to have your toddler cleaning the carpets, there are many age appropriate chores that can be given to your children. These chores teach them responsibility and if you offer an allowance, you can teach them financial responsibility. If you make up a “chore list” and tie a dollar amount to each item they can perhaps pick and choose; for example, “$2 to rake the lawn, $1 to fold the towels, etc.
- Open a savings account. Set up a plan with your children to provide them with the allowance and that part of it will go into a savings account while they can retain a portion of it for “fun money.” Providing them a copy of their bank statements reinforces the fact that they’re growing their savings little by little and that’s powerful incentive. Explain to them that if they have their eye on a specific toy or activity, they need to save for it through the portion of the allowance money allotted to them. This shows them the value of a job well done and provides them an appreciation for saving for what they truly want. Be prepared for the times though when they will just spend all of their allowance on a bag of candy or other treat; remember it is their money but you can also remind them when they’ve missed out on a purchase with a larger payoff that they should save and not spend it on impulse purchases.
- Financial lessons for older children can include the costs of paying for car insurance (in fact, saving up to buy a vehicle, or a portion of it) and the money to put gas into the vehicle. In some cases, your child may not be able to, or have time to hold down a job while in school because of studies and extra-curricular activities so you can offer them more intensive chores with a higher pay off.
Understand that it’s difficult for children and even pre-teens and teenagers to understand the sometimes vague concept of “saving for a car” or some other far-in-the-future purchase, but working with them from an early age can teach them financial responsibility. As many adults find themselves drowning in debt, they are seeing the need to teach their children at a young age to protect themselves and their financial future.
Do you have any stories to share about how you helped teach your children financial responsibility?