On the second day of the “Eight Days of Income Protection” we bring you two tips for teaching kids about money, and one coverage we all need.
Money is an important part of life which means it’s extremely crucial to understand it well. Likely, your children won’t learn many financial lessons in school, but it’s never too early for teaching kids about money at home.
Today, we offer two tips for teaching your children about financial responsibility.
Show Kids How to Save Money
Teaching kids about money is difficult if they don’t understand how it can be used.
Begin by being the financially responsible person you want your kids to become when they grow up. Your children will have a better chance of being smart about money if you set a good example for them.
You can show your child you save money too. For example, put money in a jar while your kids are watching or take them to the bank when you’re making a deposit into your savings account. Explain to them that this is your “savings jar.”
This can show your kids that savings is just a regular part of life. Generally, children want to be like their parents, so when they see you save, they’ll be inspired to save as well.
Then, give them the chance to actually interact with money. A weekly allowance is a great way to teach value for money. A regular allowance can help kids recognize currency as well as understand how to complete a shopping transaction.
Use your next trip to the store as a potential lesson for your child. Laura Levine, president and CEO of the Jump$tart Coalition for Personal Financial Literacy, a group that teaches money skills to children, explains “give your child a dollar to spend on anything he’d like, such as a snack. Pretty soon, kids understand the value of money and that it has limits.”
Once they begin to understand money, show them ways they can save and spend their allowance.
Neale Godfrey, founder of the Children’s Financial Network, a company that promotes financial literacy in children, recommends to “pay the allowance in small bits and coins, so the child can divide up the money.”
She advises parents to teach their kids to save money for various causes such as:
- Spending money
- Saving for bigger purchases
- Saving for college
You can teach your children to allocate a certain percentage of the allowance to all of these buckets.
Teaching Kids About Money by Setting Goals
Set short-term and long-term money goals with your children.
For instance, you call tell your children they are allowed to buy a new toy with one month’s worth of savings but they can only buy an iPad after several months’ of saving.
Encourage your kids by reminding them how close they are to their money goals. When they reach the goal, make sure to praise their efforts. This can help your children learn about how satisfying and rewarding it feels to save money.
If your kids make a bad purchase, take it as an opportunity to teach them about learning from mistakes. For example, show them how much they have left in the piggy bank or savings account and explain that this means they will have to save for longer now to get that iPad.
These two tips can show your kids the basics of money. Teaching kids about money early in life can help them become financially responsible adults.