You may be providing for your kids now, but not far into the future they will be earning their own money and will need to know how manage their finances. Start by teaching your kids the following concepts now and they’ll thank you in the future.
1. Money doesn’t grow on trees
When your kids start nagging you to buy things, that’s when you teach them that you don’t have an unlimited supply of money. When they reach an age where they can understand this concept, you can also explain to them where it comes from. It’s important to teach your kids while they’re young that you have to work for the things you want.
2. Priorities first
One of the most valuable lessons you can teach your kids is that what they want is not always what they need. Encourage them to prioritize the items they want, and teach them that they don’t always need all of the latest toys. Making distinctions between what they want and what they need is key to budgeting.
3. Save Save Save
When you give your kids some pocket money or an allowance, do they immediately run to the toy store? Kids tend to spend every penny they get on the first thing they see. A great way to educate them about managing finances is to teach them about making calculated decisions. You can explain to them that if they save a few months worth of allowance, they can buy that new video game they’ve been asking you for, or any other bigger item on their wish list. You can encourage them to save by putting money in a piggy bank, or having two jars for ‘now’ and ‘later.’ This will help them understand the concept of putting away a set amount of money each month- a very valuable lesson for future household finances.. As your kids get older and their ‘later’ jars fills up, take them to the bank and open up a savings account.
You may wonder why it is important to give your kids allowance even though they aren’t contributing to the family income. Giving allowance actually proves to be educational for kids. It helps kids understand and learn what they should be spending money on, and how to save money to buy things they really want or need. Pro tip: set a time or date that you’ll give them the set allowance (i.e weekly, monthly, or at the beginning of each month). This way they’ll also learn to plan accordingly.
5. Write it down
Knowing where your money is going is an essential step to managing your finances. Encourage your kids to get into the routine of writing down how much they spend and recording where the money is going. This will also help parents keep track of all of the small pocket change you give to your kids. Pro tip: if you’ve set a budget limit for the month, make sure the expenses never exceed this number.