Being able to handle money wisely is the greatest gift you can give your kids. Struggling with money is stressful and unnecessary if you create the foundation for smart spending and saving. Here are 10 ways to teach kids how to manage their money and to help instill your money values in them.
- Pay yourself first. Decide with your child what percentage of the money he earns or receives that he will get to just spend however he wants. Be it on candy, bubble gum machines, or toys. It’s important that he have some money that he feels like he can spend however he chooses. You can set the rules as to how and when he can spend it, but make sure that he does have some money for fun stuff.
- Create jars and label where the money is to go. Take some mason jars or recycled jars and label them with the different places that the money is going to go. Have jars marked, “Fun Money”, “Long term Savings”, “Short term Savings” and “Charity”. Feel free to change the names around to fit your goals. Long-term savings could actually say, “College Fund” and the short-term savings could say, “Cell phone”. Things like this will allow you and your child to personalize your savings system. Once you hit a certain amount in your jar you can move it to a bank account.
- Help your child choose a charity in which to donate. Giving back to the world is an important lesson that kids need to learn from a young age. In your case maybe you would like your child to give money to your church in addition to or instead of a charity. Maybe your kids love animals and would like to donate money to the Humane Society.
- Set a savings goal for big ticket items. If your child is constantly asking for a large toy or electronic encourage him to start saving for it. Print out a small thermometer chart and help him fill in the thermometer as he puts money in the jar. It will increase the excitement if he feels like he is getting closer to his goal. You could offer up some extra chores where he could earn some extra money. You’ll be amazed at how ambitious kids can be if they have the proper motivation.
- Make sure they have long-term savings. Talk to your child about going to college or buying their first car. These items are very expensive and have to be saved for. Determine what you think the fair amount would be to put into the long term savings jar. Is it 10 or 20%?
- Open a savings account for your child. Take your child to the bank or credit union and help her open her first savings account. There are online options as well that will allow you to add money to her account electronically so the money is never actually in her hand. This option is available and you will have to decide whether it’s the right option for you and your child or not. When opening a savings account you can explain about interest. Let her know that the bank will pay her for letting them use her money.
- Help your children realize the difference between a need and a want. This is an important discussion to have with your kids. You will hear your kids tell you that they NEED to have the latest jeans or cell phone, but those are wants and not needs. Help your kids see the difference and then when they come to you and say that they have to have something you can ask if it’s a need or a want. Wants aren’t a bad thing, but needs should be taken care of first. For example, he ‘needs’ to put money into savings for his future more than he ‘wants’ to get the latest video game.
- Create a filing system to keep track of receipts. Getting your child used to tracking their money is an important habit to get them into. When they buy something with their money they need to come home and write down the purchase in their spending journal and then put the receipt into a file. Determine how many files or envelopes you will need. One way to do it is to create an envelope for each month and then have a big envelope to keep all of the smaller envelopes in. This method may work better if you have multiple children tracking their spending. Another way would be to keep the monthly envelopes in a file marked with their name.
- Demonstrate money saving techniques. Kids usually go to the grocery store with mom or dad and that is their first experience watching mom spend money. Show the kids how coupons work and in store discounts. Explain various tricks you use to save money while grocery shopping. You may think that your kids won’t need this information for years to come, but it’s important that kids are aware that mom saves money where she can too.
- Set a good example when it comes to money values. Keeping your own spending journal and receipt file will set a good example for your kids. Let your kids know that you are saving for a big item or vacation. Kids learn by example and it’s easier for them to learn when they know what you are doing. It’s not so important that your kids know every detail and concern that you have about money, but impress upon them the important stuff.