It’s not the money that matters. It’s how you use it that determines its true value.
Do you want your children to become financially responsible? If so, then you need to teach them some crucial lessons about money. If kids can participate in Masterchef USA and win the show, then they have the potential to become junior money masters too. But for that, you need start with simple money lessons at a young age.
Planning is important before shopping. Children learn by your example; share with them as you make a plan before shopping. Creating a shopping list and budgeting with your children sets a positive example. Let them know what you’re going to buy and why. Explain what your buying and why so your children understand how you’re planning to purchase the necessary ingredients for dinner or supplies for cleaning the house. Next, compare prices online and clip coupons too, demonstrate to your children that it’s good practice to find better deals to save money. If a particular item that you use often is available in bulk, explain the advantages to purchasing that way and even calculate the net savings. This way your kids will learn how to plan their purchases before shopping.
Money isn’t made by ATM machines. Money doesn’t grow on trees, nor can you print it a home (at least not legally that is). Many young children think that you can easily get money from the ATM machines and that’s where it comes from. But that’s not the case and money is a finite resource. Clear this misconception early on. Explain to your children that you need to work in order to earn money. Banks just hold onto your money for safe keeping. Teach your children the value of earning money through completing chores or other types of work around the house.
Track what you’re spending. The key to effective money management is keeping track of the money you spend. Help your children understand that the foundation to becoming a money master starts with knowing how much you spend and where. It’s important for kids to learn about where their money is going and why it’s being spent that way. One idea is to give your children a notebook and have them write down their expenses and savings.
You pay interest when you borrow money. Understanding the concept of debt and borrowing can be simple. As adults we understand that credit cards, mortgages and loans bear interest. One way to teach your children this concept is by borrowing money from them, say $2 dollars for example. Tell them that you want to borrow the money for a week and that when you return it to them you will pay interest so they will receive back more than what you borrowed. A week later give the $3 back and explain how the interest over the past week made it so you had to pay them back more than what you borrowed. Learning the relationship between time, money and borrowing can be powerful, especially at a young age.
Sharing is caring. Children are often times pre-disposed to wanting to help others, it’s a wonderful thing. Teach your children that they can donate a part of their allowance or other money they earn to charity. It’s important for them to understand that donating to charity is a choice, and that the money they donate can help those in need. Money can be used to do more than just buy things, and using money responsibly to help others is an important lesson in life. It doesn’t matter if you can only give a small amount, every little bit helps.