Teaching kids about family finances can be easy and fun. Learning about money helps kids learn how to be responsible, generous and conscious of spending choices. It's never too early to teach kids about the family's finances. Having a grasp of what it takes to run a household teaches kids the value of money at an early age. Here are a few tips to introduce the idea of money and budgeting to kids:
ALLOWANCE — A great way to acquaint kids with the concept of money and budgeting is to assign chores and pay an allowance. Teach them save 10 percent each week in a savings account. Discuss larger purchases, like a PlayStation or designer jeans, that may be out of your budget and have them set aside an additional 10 percent to go towards that purchase. Once those obligations have been met, allow them to spend the rest of their hard-earned money. Never let them borrow against the next week's payment, as that will only set up a poor expectation for later in life. Setting up a simple system when kids are young will help establish a foundation to build on as they get older. Giving kids an allowance for discretionary spending will help them learn more about spending and be more mindful of the things they really want to purchase and the things they would rather save up to get. Receiving an allowance also teaches them the value of working to get a "paycheck."
BUDGETING — By the time kids reach elementary school, they are old enough to understand basic finances. Have your kids sit with you weekly to pay bills and pass out allowances. Discuss the costs involved with running a household, i.e., mortgage, utilities, groceries, gas for the car, school clothes/supplies, sports fees, daycare etc. Convey the importance of paying bills on time and introduce the idea of a credit report and the impact it has on large purchases like a car or using a credit card when you need to make installment payments. Explain the filing system and let them file the paid bills in the proper folder in the filing cabinet. Discuss the importance of having a long-term savings account versus just saving for a large purchase like an appliance or vacation.
EXPECTATIONS — Kids pick up on patterns easily, so be careful not to set expectations for buying something each time you go shopping. Avoid whining children by allowing them to bring along a wish list when they go to the store. If they see something they want, they can put it on their wish list for birthdays and other holidays, or choose to save and purchase it for themselves. Being able to add something to the list gives them something to look forward to and stifles the need for instant gratification. Before birthdays and holidays or once they have saved enough money, have them prioritize their wish list. Allowing them to have control over their spending decisions will give them a higher sense of satisfaction.
Like it or not, the world revolves around money. Learning how money works in our society is a lesson all kids need to understand. Getting kids involved in family finances gives them a sense of belonging, it teaches them to make responsible choices and it develops life-long habits of saving for the future.
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