It is easy to give your kids everything they want if you can afford it. After all, seeing the smile on a child’s face just makes you feel good. Unfortunately, this is not the way to teach children about money management. Rather, you want to help develop an early understanding of the value of money through personal economic experiences. This is the best way to help the next generation develop financially responsible habits.
Below you will find some tips for teaching your kids about money.
Invest in a Piggy Bank
Years ago, a piggy bank was a common gift – and a frequently used one. Today, though, most transactions take place using cards or online transactions where physical coins and dollar bills won’t work. As adults, this way of handling transactions is a necessity, but for kids – it takes away from seeing and holding the money. It is easier to learn about managing money when you are dealing with something tangible.
By giving your child a piggy bank, you can offer encouragement to save up for something they’ve been asking for. As their money accumulates, they can physically count their money – and hold onto it – until they reach their goal.
Give Your Child an Allowance
Kids cannot learn about earning and saving money unless they have an opportunity to do so. When they are too young to get an actual job, they should be rewarded with an allowance for things that they do beyond the scope of cleaning up after themselves. And, as they learn about earning money, take this as a good opportunity to teach them about budgeting and saving.
Open a Savings Account
Learning how interest accrues emphasizes the importance of setting money aside and watching it accumulate is a valuable lesson that can be carried into adulthood. Establishing a savings account for a child can help to demonstrate this.
Saving is a huge part of lifelong money management. Having an actual savings account (rather than just a piggy bank) can give your child the opportunity to monitor how their money increases with accrued interest as well as how it decreases with spending.
Encourage Entrepreneurial Skills
Many kids with goals for saving up money can come up with some very crafty ways of earning. It could be something as simple as babysitting or setting up a lemonade stand. Or, it may be about creating a piece of art and selling it for a profit. Whatever your child comes up with, encourage them to run with it.
If you or someone in your family owns a business, consider it a great opportunity to talk to your child about how it came to be, the hard work it took to make it a success, and the benefits you received from it.
Teaching Your Child About the Stock Market
As your child gets older, move on to some more complex topics, such as learning about the stock market, levels of risk or various investment opportunities. Take it a step further by allowing them to gain real-life experience. As you teach about stocks, allow them to do their own research and find a couple they are interested in and go through the process of investing some of their saved money. Together, you can monitor the fluctuations in the market and, with any luck, gain a few extra dollars along the way.
ICC provides clear and unbiased financial guidance for their clients. If you’d like to learn more, visit www.ICCNV.com.