Our kids learn a lot of things in school, but money management is not one of them. Sure, some schools might have special activities or clubs that have something to do with finance, but that’s about it. In a world where financial responsibility is a must, it’s absolutely crucial for our kids to grow up knowing their way around money matters.
Fortunately for your kids, they still have you.
If our schools don't teach financial literacy for kids, then it’s entirely up to you to get them up to speed about the subject. With your guidance, they should be able to understand at an early age how money works, and how to handle it when they finally get their chance to earn.
Here are some ideas for money management lessons for your kids to get you started.
1. They must work hard for the money.
It’s not far-fetched that some children automatically assume that money is something that comes out of an automated teller machine. After all, it’s what they see when you take them shopping and you drop by an ATM to withdraw some cash.
A lesson from you about the concept of money and how you can get it should be good enough to dispel that notion. Make them understand that they have to work to earn money. To make that point, give them the chance to earn money by giving them an allowance for doing age-appropriate chores.
2. They need to save up.
Are you giving them an allowance for doing chores? If you are, then you have the perfect opportunity to teach them how important it is to set aside some of their money for savings. Tell them how having savings gets them ready to deal with a specific need or want in the future. And since we live in a hi-tech era, create an account for your kids with an allowance app that will teach them a lot of things related to money management.
3. Needs take priority over wants.
It’s but natural for kids (and even adults) to entertain thoughts of blowing all their hard-earned money on something they want. There’s nothing wrong with that, but children need to know the difference between wants and needs, and how the latter must always be a priority over the former. With lessons discussing wants and needs, they are going to learn how to make sound financial decisions at a young age, an ability that will serve them well when they enter adulthood.
4. Budgeting basics
Creating a budget is one money management lesson that your kids would do well to learn when they’re already receiving an allowance for doing chores. It will teach them not only the importance of sticking to a budget but also the consequences of not doing so. You can drive this point home when they go over budget a week or so before they get paid their next round of allowances. Whatever you do, don’t give them an advance on their allowance so they’ll know not to go beyond their budget ever again.
5. How to track their spending
Your kids will always tend to go over any budget they make if they don’t track their expenses. So make them list down everything they spend their money on so they can see clearly where their money is going. With a comprehensive list, they should be able to see where they can cut back and save some money.
6. The concept of credit and how it works
We live in a world where practically everything runs on credit, so it’s only right for your kids to know what credit is and what it’s all about. Tell them that credit has good and bad sides and give them pointers on how to handle it well so as not to get buried in debt.
7. Setting financial goals
Many kids just spend their money on whatever catches their fancy. Help make your children be a bit different by teaching them about setting financial goals, like saving up for college. These goals give your kids something to aim for. They will likely try to earn more money or do a better job managing what they have just to achieve whatever financial goals they set.
8. The concept of delayed gratification
Admittedly, many adults have a problem delaying their gratification, but it would really help your kids if they learn about the concept while they’re still young. By explaining to them the benefits of resisting the temptation of getting an immediate reward and wait for a later, more valuable one, you are, in effect, teaching them how to be patient, an attribute that will help them as they go through life.
9. Making investments
Your kids may be too young to understand stocks, bonds, and other investment vehicles fully, but you can always introduce to them the idea that they can actually make their money grow. So discuss with your kids the concept of making investments, how they work, and how doing it well can make them rich. Satisfy their curiosity by showing them stock certificates if you have them, or any other documents pertaining to your own investments.
10. Sharing
Kids learning about money and how to earn it is good, but you must also teach them the value of giving back to the community. You can tell them stories about sharing and how they help people. Better yet, show them small acts of sharing what you have with other people, so they will know how good it feels to be able to help in your own way.
