Just like reading to your child, it is never too early to start teaching them about money. Before the age of 7, children won’t generally understand the give and take nature of finances. However, they will have witnessed their parents making monetary transactions, and because of their inquisitive minds, they will be curious about this process.
Introducing the Concept of Money
Generally, students start off learning their ABCs and 123s. Therefore, it would follow that parents should start kids off with learning the value of coins, first. Providing a transparent piggy bank, to allow a view of the visible growth of coins which are piling up inside. This sight is, for them, very magical. Make a point of counting out pennies, nickels, and dimes. Demonstrate how five pennies equal one nickel, and two nickels equal one dime, etc. With this practice, you will also be teaching them math basics, as well.
Providing an Allowance
80% of Americans believe that children should receive an allowance. A number of parents agree that it should be linked to chores, while still others believe that a portion should come from chores, and the rest should be gifted to them. Children will appreciate the opportunity to earn money, but more importantly, the long-term goal for parents is to teach them the value of each dollar that they are earning.
When children are first starting to understand the value of money, it is important that you pay them in coins, and soft bills. However, once they recognize and respect the value of the dollar, you can pay them with an egift card. An egift card is available, conveniently, and may be purchased for many of their favorite brands, or as a Visa and Mastercard accepted ubiquitously. Just ensure you buy from trusted retailers like GiftcardGranny.com.
Opening a Savings Account
Many banks and credit unions allow for the children of their members to sign up for savings accounts. This will help assist parents with teaching their child about interest, withdrawals, deposits, and reading a monthly statement. When they are ready, generally after 16 years of age, or sooner, talk with them about starting a checking account. Help them to monitor the account, to avoid severe overdraft fees; and how to keep a running balance of the amounts deposited and withdrawn, to avoid over-spending.
Fostering an Entrepreneurial Spirit
Who didn’t operate a lemonade stand as a child? It is, indeed, one of the best ways to get kids started on the path toward financial independence. Encouraging children to earn money through chores, and neighborhood gigs like raking leaves, shoveling snow, and mowing lawns, will help them build confidence, and foster a healthy sense of accomplishment.
Inspiring a Passion for Learning
The world is an amazing place, with so many people, cultures, and activities to experience. Help children see the connection between being passionate about the world, and earning, then saving money. Saving money will, ultimately, let them afford plane or train tickets, sporting events tickets, money for the movie theater, or a concert, and yes, the ability to purchase the newest Xbox that they’ve been coveting.
Play different math games, board games, and money games that encourage them to have confidence, and a real-world sense of what they have, what they can earn, and where it can take them.
Letting them Make their Own Mistakes
As humans, making mistakes is a natural part of the game of life. The only way to learn, truly, is by making a mistake, and realizing the contrast between the right way, and the wrong way of applying yourself. If a child spends too much money on one toy, and cannot buy a gift for his grandmother, let him get creative, and make something unique for family gift giving. If your daughter bounces a check, and $32 comes out of her checking account, let her review her withdrawals, and learn from any error in addition, or subtraction, that was made.
Budgeting and Fostering the Idea of Options
Money is all about having choices. Once that money is spent, say, for one Xbox game, instead of a different Xbox game, that choice is no longer available to you. Until, of course, you work hard and save more money. Help your child to see that saving money means having more options available to him or her. Sure, they could purchase that cool game now, but what if they saved their money for another two months, and could then buy the bundled pack, and get even more games. Creating a budget with your children and allowing them to watch you tackle the family finances, will provide them with skills which will last a lifetime.
Talking about Credit
Once your children reach college age, it is time to talk with them about building credit. Help them see that, ideally, they should only purchase items with their credit card, that they will be able to pay back at the end of the month. A prepaid credit card is often the perfect solution for a teen, who may have some issues with responsibility, and impulse spending.
Let’s face it, even many adults have problems saving money. However, that occurs, generally, because many people are not raised with the knowledge, they need to handle money wisely. Give your children a head start, by allowing them to take part in financial interactive-transactions and gain a healthy respect for how finances work.