With the horror of the economic downturn still a painful memory, there is ample need for teaching our children to be responsible with money. By learning the value of money from a young age they can manage their own finances well and form good money habits by the time they reach college. Below are three practical ways in which you can enforce sound principles that will serve them well in life.
Show Your Children the Role of Money in Life
Understand kids learn through example, therefore you should aim to set a good example by managing your own finances well. Having a place in the house where you review paperwork and plan finances, such as the kitchen table, can be a good way to instill the need for regular maintenance and active management in your children. In addition, you can invite your children along with you to trips to the bank. Be sure to emphasize that these activities, although not fun for most people, are a necessary part of life and should be embraced as a duty. When tax return time swings around you might also consider explaining to your children why it is important to pay and file taxes. For instance, you could point to a fire truck or police office and explain that tax dollars fund these essential services.
Teach Kids How to Invest
Another way that you can develop children’s understanding of money is through the idea of investment and growth over time. With the small amounts of money that children receive in the form of an allowance it can be difficult for them to expect growth. However, you could illustrate it with a number of examples. For instance, you can show how your house appreciates or depreciates over time. You might also plan seedlings and watch them grow over time. Again, emphasize the need for regular maintenance and steady management to get the desired results. As watering and attention enables us to cultivate seedlings, investment requires care and involvement.
Design a Sensible Allowance Amount
This is an area which causes some confusion for some parents. Parents should use their best judgment. For each age range, the allowance should be large enough so that children can buy items that they like, but small enough that they must make tough choices about what to buy. By following these principles it is possible to provide for your children without spoiling them. If unclear why not try looking through catalogues and online stores such as EBay to gain a sense of the cost of popular items. Use this to form a rough budget and allowance amount.
Financial Education Starts With the Parent
The above steps will enable you to instill key principles in your children without the need for them to hold down a par time job. Simple and practical, they can be included in a typical week and discussed around the dinner table.