It’s essential to teach children about money management and budgeting at a young age. The last thing you want is for kids to not “get it” and end up in the hole. Getting the learning process going early on puts them on the path to becoming financially responsible adults. When our children were very young we taught them about money using a few unconventional approaches. Besides our tactics, you might want to try the following:
Teaching money skills to kids starts with allowance. An allowance, if used properly, teaches kids about planning, decision-making, sharing, charity, and responsibility. Kids should know that saving money is important for their future and that it’s not simply what people do with leftover, unspent money. Also, parents should provide the allowance on time; otherwise kids will think it’s all right to be late with their financial obligations.
An allowance also provides a great opportunity to teach kids about helping other people. A portion of the kid’s allowance can be given to a charity.
Some experts suggest that a child’s allowance shouldn’t be connected to performing chores. Children should have chores to do simply because they are part of the family.
Useful Online Resources
Family Education’s Kids and Money webpage provides fun games and tips to help children learn the value of money.
PBS offers its Managing Money: Spending and Saving website, which covers topics such as:
- Spending and Saving
- Needs vs. Wants
- Set Money Goals
- Expect Expenses
- Track Your Cash Flow
- Create a Budget
- Make a Saving Plan
- Bank It!
- IML Money Tips
- From the Mentors
The Washington State Department of Financial Institutions provides a useful web page called Fun Activities that Teach Kids about Money. It provides links to free activities parents can do at home with their kids. There are activities for both young children and teenagers.
Parents should provide guidance but allow their children to create their own budget. Of course, this presupposes that the parents track their own spending too. This is a very valuable experience for children. Over time they’ll learn to make smart decisions with their money. A weekly budget may be the best choice for young children, while teenagers may prefer a monthly budget. The pbskids.org site has a useful article called Managing Money: Create a Budget. It provides good tips for creating a weekly budget. Parents and kids can print out and use its blank Budget Sheet.
A budget should include fixed items such as donating to a charity and a savings allocation. Kids need to make an estimate of their variable expenses, such as entertainment and clothing. The budget can be adjusted as the child’s income increases or as they begin saving money for an expensive item.
Staying within a budget teaches kids the importance of money and its proper management. As an added benefit, being able to stick to a budget gives kids a feeling of accomplishment.
Parents’ Financial Behavior
Children learn from their parents’ behavior. The way parents handle their money and deal with their financial issues has a huge influence on their children. Parents are in a position to have a positive or negative influence on their kid’s ability to handle money and finances. If parents don’t follow their own financial advice, chances are their kids won’t take them seriously.
Parents need to be careful and not overwhelm their kids with too much financial information at one time. Too much information too soon may discourage children from wanting to learn about money and finance.
Begin teaching children about money and finance when they’re young. Add some fun by using some of the quality interactive web pages available on the Internet.
Brian Jenkins has been writing about various career and education topics for BrainTrack.com, including degrees in finance, since 2008.