Teaching your child to save money at an early age is probably one of the best things you can do to prepare them for adulthood. As a parent, it is your responsibility to train your kids how to responsibly handle their finances, especially during their formative years.
The question is, how can you teach your children this important financial lesson?
Truth be told, many parents think that their kids will eventually learn how to manage their money when they grow a bit older. Saving money, however, is a habit that will take years to practice so it’s best to financially arm them with the right skills and knowledge that will help them navigate life.
In this blog post, learn how to effectively educate kids about money.
The Difference Between ‘Wants’ and ‘Needs’
While you may want to give your children the finer things in life, setting the line between “wants” and “needs” is a must to help them understand the value of money. Start by explaining their basic needs, such as food, clothing, and shelter. On the other hand, all the extras, including their toys and gadgets, are considered wants.
Earning and saving money goes hand in hand. Thus, a child who knows how much hard work it takes to make money can easily learn how to be financially smart. According to the American Institute of Certified Public Accountants, two-thirds of parents pay their children an average of $30 per week for doing at least five-hours of chores.
Once you have established the concepts above, it’s time to teach your kids to set their saving goals. For instance, if your child wants to buy a $50 toy, discuss how much they need to save per week and how long it will take them to reach that goal. So, if they can save at least $10 from their five-day school allowance for five consecutive weeks, they can have enough money by the end of the given period.
Where to Save
Now that your child’s saving goals are clear, provide them with a safe place to stash their cash. Younger kids may put their money in a sealed piggy bank while the older ones may deposit their cash at a local bank. Ask them to keep a tally board so they can see their progress.
How Much They Spend
Does your child know how much they are spending in a day? Ask your child to list down all their expenses in a day. Once they have added up all their purchases, make sure that they understand which items are necessary or not. It can be an eye-opening experience for them, especially if they are now starting to save up for their goals.
Everyone likes free money, even kids. Thus, establishing a monetary incentive system can help you encourage them to reach their goals. For example, you may reward your child with extra cash whenever they hit the $10-mark. It will not only help them succeed with their goals but it can also motivate them to be more consistent in saving up money.
Room For Mistakes
Mistakes are bound to happen, especially for beginners. If your kids fail to reach their target amount, don’t let such a failure discourage them. Make sure that they understand what went wrong and how they can avoid it next time.
Be a Role Model
If your children often see you on a shopping spree, you can’t expect them to value money. Set a good example by showing them how you are saving up for retirement, emergencies, or other financial goals.
Instilling financial lessons to your kids is way more important than you think; it’s something that they can use to succeed and thrive in life. Make sure that they are equipped with all the knowledge and skills they will need to have a bright financial future by following these tips.