There is more beyond a piggy when it comes to money management for kids. A lot of kids today know that money comes from a bank or the ATM, and to buy something means swiping a piece of plastic. As much as you wish it was as true as it seems, it should make you recognize it’s not too early to start educating your kid about money management.
The vital starting point is to make your kid understand that money management is a fun activity, and that ‘money does not actually grow on trees’. This of course, is minus the negative implications disguised in the phrase. The following 8 lessons can be taught to kids, alongside teaching them how to manage money wisely from an early age.
Lesson One: Role model
As an adult, a lot of your financial programming is a consequent of what you learned as a child. Allow them learn that you don’t actually have everything, but are saving towards something in future. This you can do by letting them see the way you compare things in the grocery store or in the shop. Equally, let them be aware that you are helping someone in need or giving away money to charity.
Lesson two: Value
Each month, give your kids a monthly allowance, something they shouldn’t work for. But let them know they have to spend it wisely till the end of the month, and if they need more, they have to work to earn it. They can ‘earn’ the extra money by working on simple chores in the house. If you are contemplating about them being too young to work; if they are old enough to have an allowance, they are old enough to work around the house.
Lesson three: budgeting
It doesn’t have to be as boring as it sounds. You can set up 3 jars for your kid; Saving, Spending, Giving away. You kid will wisely divide the allowance among the three jars, and ultimately supplement spending jar by ‘earning’ extra in house chores. It doesn’t sound very boring right?
Lesson four: Goal Setting
Whatever your kids want to purchase encourage them to save towards their goal by helping track it frequently. Its is okay if a parent contributes towards the goal, but let them know the contribution but lay the entire responsibility on them for attaining their goal by earning and saving enough.
Lesson five: Self Reliance and Creativity
Shift mental gears towards your child. For instance, if your kid wants something, avoid saying “we can’t afford it” instead, make them think “ how can we afford it?” Could your child ‘earn’ extra cash by walking a neighbor’s dog, assisting in snow shoveling, washing cars, mowing the lawn or selling lemonade?
Lesson six: Business
Teach you kid business by say setting up a small candy vending machine. Allow them to keep the profits from the machine, after paying back your initial cost of purchasing it. Monthly stock taking, checking on the vending machine, cash collection and paying expenditure are some life and business concepts for the kid to learn.
Lesson seven: How money can work for them
Let the kids buy stocks or bonds or open a savings account for monthly savings.
Lesson eight: Gratification
Teach the kids delayed satisfaction even if you can afford to buy whatever they want. Sometimes it’s allowed to spoil the kids, but set limits. Let them learn to work and save for anything they want and they will learn hard work, value, overcoming obstacles and self esteem.
Experts advice on starting money management for kids as early as when they clock 3. It’s never too early, the time is at present.