Happy New Year!
Over the holiday I was lucky enough to spend much of my time with family! A key conversation that came up was money - "I know shocker!" As adults, we do our best to manage money, cover our bills, save etc. but are we teaching our kids how to do the same? Finance may seem like a grown-up concept, but the kids ranging in ages from 9 to 18 that I "hung out with" said that they are taught nothing about money and wish they knew more. I heard about many things they wish they didn't have to learn.... but that is a whole other story!
I learned that kids are never to young to learn about money and they know more than we give them credit for, so start early and teach them the value of money and the basics of budgeting, so they’ll have those skills when they’re older.
Below is some spit balling I did with my nieces and nephews that would interest them:) Okay "spit balling - maybe I spent too much time with the teenagers - HAHA!"
Give Your Kids Money to ManageEvery home has a different way that they could give their own kids money -such as a chore chart and they get paid to complete the chores as does a parent(s) when they go to work. You could let them earn money based on school achievement or a combination of both. How they get the money is up to your household and the decision you make, but what to do next.
Teach Them Budgeting BasicsGive them a responsibility with that money - such as, you can spend 70% of this money on anything you like, and the remaining 30% must be saved. They need to understand this money can't be spent on anything as it is a savings plan.
When children get cash of their own, they need to decide how to spend it—and that’s the time to talk about smart buying choices. You have now taught them that they have 70% of their money to buy what they want, but now you need to teach them how! Let’s say 70% of your child's allowance at the end of a month is $7.50, but your child wants to buy a toy that costs $30. While going out and buying that toy immediately isn’t possible, your kid can set aside some money every week, then buy the toy later. That’s the value of a savings account in a nutshell.
What to do with the remaining 30% ?
When they are young, put the savings portion in a clear jar so they can watch their money grow and as they get older help them open a bank account so they can see their own money grow.
When they get to teenage years - you could show them how to invest the money.
Just think: 8 year old - puts $10/month away for 10 years
Your monthly deposit of $10.00 for 10 years with an interest rate of 2.00% compounded Monthly
with an initial starting balance of $1.00
Final Savings Balance: $1,328.42( this is just a simple interest calculation - but it gives you an idea - $1200 grew to $1382.42, now apply that to a child earning babysitting money or working a job - show them how to save for a car or a new phone etc. and what it would take to get their - the ideas are limitless and the whole time you are teaching valuable money basics to your kids!
Help Children Understand That Everything Costs Money
Your children need to know the value of their allowance compared to the value of the things they’d like to buy. When they want a new toy, point out the cost and remind them how much they have to spend. (This is a good opportunity to encourage kids to save money.)
As your kids decide how to spend their money, also teach them to prioritize. If they spend all their savings on one item, they won’t have the money to spend on other things they might want. Because they don’t have enough money to buy everything they’d like, they need to figure out what’s most important to them.
Show Them How to Shop SmartWhile everything costs money, some options cost less. From buying generic products to doing cost comparisons, adults try to make their budgets stretch as far as possible—and you can teach your kids to do the same with their allowances.
Also talk about sales and coupons, which require patience but can stretch their allowance money a little further. Again, this will help teach your children how to prioritize: Would they rather pay full price for an item or wait for it to go on sale and keep the extra cash? Your children will be delighted to have more spending money, and will learn how to make the most of a limited budget. That’s a skill that will come in handy later.
Let Them Make Decisions (and Mistakes)Offer advice, but don’t dictate what your children do with their money; allow them to make their own spending decisions. While they’re likely to make mistakes along the way, it’s better to make those mistakes—and learn from them—now rather than later.
The ideas in this post originally appeared on DealNews.