When your children are young, you might give them a few dollars each week as an allowance or play money-related games like Monopoly. Aside from casually introducing them to the concept of money, you may not think much about the connection between your kids and finance. However, teaching your children about finances now can help them find balance and better understand how to manage money successfully to prevent potential stress in the future. Here are some tips to help you get started.
Divide the Allowance
Handing your kids over money can help when they want to buy an item from the toy store or the most fashionable jeans that all of their friends are wearing. However, such practices also encourage kids to spend whatever money they bring in. If you haven’t started giving your kids an allowance yet, make sure that when you do for the first time, you require them to save at least half of the money. If you already give your children an allowance, start this practice now. When children learn to save money, doing so won’t feel like a strange and intrusive practice when they want to make bigger purchases, such as a car or a house, down the road.
Open a Bank Account
Now that you have your children in the practice of saving money, you will want to teach them the proper way to do so. Look into a free savings account that will allow your children to earn interest. Depending upon your kids’ ages, you may need to keep the account in your name for some time. Ultimately, you do not want them to dip into the account whenever they want. Make it a requirement that your children need to have a discussion with you before they withdraw any funds.
Set Savings Goals
Of course, you do not want to encourage your kids to set one savings goal after another and continuously deplete their bank accounts. Instead, talk about what makes up a reasonable savings goal. Then, sit down with your children to determine how much money they need to put aside weekly to reach that goal in their desired amount of time. Do not discredit small goals, either. For example, if your kids want to save up for a new bike, work with them on achieving that goal. As they grow older and have more expensive items that they wish to purchase, they can apply the skills from their younger days to those financial plans.
Weighing Rewards and Consequences
You can also help your children find balance in their financial lives by teaching them how to weigh rewards and consequences. Chances are that your kids will eventually want to withdraw money from their accounts for a frivolous expense. Explain that if they do so, they will have to wait longer for the item they are trying to save up for. While you do not want to lead your children down a path of financial ruin, remember that you will sometimes need to let them make mistakes in order for them to grow. If your children are really begging to take money out of the account for an item that is not as important, consider letting them do so. Then, they will see what happens in the long term. They will learn that they now need to wait even longer to get the item that they really wanted.
Enjoy the Indulgence
When your children have saved up enough money to purchase the item that they really want, make sure to enjoy that indulgence as a family. You do not want to teach your kids that money can buy them joy and happiness, but you do want to show them that being smart about savings and financial goals can help them feel a sense of pride in what they purchase. This practice also helps them not build up stress and anxiety over money. Once your children have secured those items, teach them the proper way to care for their purchases.
How do you teach your kids about money?