How to Teach Your Kids about Money?
Perhaps one of the most valuable gifts you can give to your children is teaching them good money management skills. Good money habits can insulate kids from making major mistakes later in life and will positively impact their quality of life as adults. To raise money-smart kids, parents should start at a young age and regularly reinforce money lessons as children grow up.
Unfortunately not all parents consciously try to foster money skills in their offspring. There are many opportunities to give children experiences in using money. When children are very young, you can work money concepts into your child’s imaginary games, like playing pretend store or restaurant.
Here are 5 ways to teach your kids about money:
An allowance teaches kids how to earn, save, invest, budget, delay gratification and make wise purchasing decisions. These are all the skills needed to live a sound financial life as an adult. So if you want your children to have great money skills, consider giving them an allowance. Make sure to set some limits on what each child has to spend at first so that a mistake in judgment will not involve enough money to cause unhappy consequences.
Make it a point to discuss saving with your children. Younger children may be able to understand saving for something like a school outing in two weeks, and older children can understand saving for a television or a car. Don’t emphasize saving to the point that your children save when they have spending needs. Let them know that there are expenditures they should make and that they have obligations to themselves and others.
Showing opportunity cost
That’s just another way of saying, “If you buy this video game, then you won’t have the money to buy that pair of shoes.” When your kids become teenagers, they should be able to weigh decisions and realize that each decision has a consequence.
Setting an example
Little eyes are watching you. If you’re slapping down plastic every time you go out to dinner or to the grocery store, they will eventually notice. If, at the end of every month, you and your spouse are arguing about money, they’ll notice. Set a healthy example for them, and they’ll be much more likely to follow it when they get older.