10 money management lessons you need to teach your kids.
Teaching children how to manage money goes way beyond setting up an allowance for kids (and hoping they won’t blow it off in one go). While giving them regular allowances is an effective way to educate them about the fundamentals of budgeting and the consequences of impulse spending, there are plenty of other important money lessons you need to instill in them while they’re young.
Here are ten crucial money management lessons for kids to begin with:
The difference between needs and wants
One of the very first things your kids need to learn about money management is how to tell wants from needs. They have to be able to identify which items are worthy of their money and those they can live without. The next time they want to buy something, ask them if it’s really necessary to buy it right away and why. If they can’t come up with an answer, then maybe it can wait.
Tracking what they spend
To appreciate the value of money, kids have to realize what it can do. Encouraging them to track their finances will help them see how much faster they can afford the things that they want if they don’t spend their money on unimportant things.
Comparison-shopping seems like a thing for adults, but kids can learn a lot from it too. The next time your children want something from the store, suggest that they look online or in other stores first – maybe it’s cheaper there! Knowing how to stretch a budget is useful to anyone, no matter how old they are.
Saving for the rainy days
Your kids have to understand that they need to save every chance they get and not only because there’s something in the mall that caught their eye. One day, they’ll need money for something, and when that time comes, they’ll be glad they didn’t spend everything they have.
Living within their means
As tempting as it is to give in whenever your kids ask for extra cash, it’s important that they recognize that’s not the case. When they realize they have to stick to their allowances, they’ll develop the habit of budgeting or be inspired to look for ways to earn money.
Children are impulsive by nature; that’s why it can be hard for them to hold on to their money for long. With a little push, however, they can be motivated to save especially if it’s for something they want. This is a good start to teaching them about financial goal-setting.
What is credit and how it works
You can’t just tell your kids “credit is bad.” They have to understand what it is, how it works, and what it entails. To make them get a better grasp of it, lend them money when they need some but have them pay for it regularly in installments.
Making their own money
Money doesn’t grow on trees, but young kids aren’t aware of that! If you want your children to appreciate the value of money, make them earn it. Whether they make their own summer lemonade stand or get paid for doing extra chores, what’s important is they know that they can’t just get it for free.
Introducing investing to kids may be a little tricky, but at least open them up to the idea of taking risks with their money for the possibility of gaining more. In time, they’ll have a better understanding of the concept.
The value of sharing and giving
Saving for the rainy days is an essential life-lesson, but the act of sharing and giving is just as valuable. Whether it’s for a charity, the community, a church fundraiser, or a relative needing help, it’s vital for kids to learn how to help others and give back.
Contrary to what you might believe, even kids as young as three years old can understand the basics of handling money when they’re taught about it in a way that they can understand. If you want your kids to grow up as financially-responsible adults, start as early as you can. That way, you’ll have more time to guide them into the habit of spending money wisely.
Samantha Green is the Content Marketing Strategist for BusyKid, the first and only chore and allowance platform where kids can earn, save, share, spend, and invest their allowance. A mom of two, she enjoys spending time with her kids and reading books to them.