Children learn from everyone in their lives. While traditional topics such as math and science are often taught in school, money is a topic that many kids never learn much about other than through observation. That needs to change.
Kids should learn about money throughout their childhood so that they are prepared to handle their own finances when they head off into the real world. Below are 5 Tips to Teach Your Child to Save Money. These are just the start, but they are a great foundation.
1. Teach Kids How to Earn Money – Early on, children receive money through birthday cards, Christmas cards or even their allowance. Unfortunately, as we all know, money is not just handed to people after they’ve grown up. Instead, they have to work to earn money.
Teaching children how to earn money is a great skill that will prepare them for the workforce and the rest of their lives. An easy way to instill this concept in kids is to have odd jobs they can perform to earn extra money. These tasks should not be ordinary responsibilities, since even adults are not paid to do their own laundry.
Instead, they should be tasks that go above and beyond the typical daily household chores, and which may ordinarily be done by outsiders. Practical examples include mowing the lawn, washing the car or removing snow. An even more enterprising child might be encouraged to start their own small business, like setting up a lemonade stand, or baking cookies to sell at school.
2. Teach Children They Do Not Keep Every Shilling They Earn – Many kids do not realize that they do not get to keep their whole paycheck when they get their first job. Instead, they see that deductions are taken out for social security taxes, federal taxes, state taxes and other items
To prepare your children for this reality, you can set up the parent tax. Whenever your kid earns money, keep a certain percentage of it before paying them.
Of course, nice parents will set this money aside for their kid’s future grown-up self in a savings or investment account, which can be seen as a precursor of Social Security.
3. Teach Kids How to Save and Invest – Most children are never taught how to save and invest because many parents never actually save or invest themselves. Take the opportunity to set your kids up for financial success by showing them how to set money aside for their future.
One way to do this is to have your child reserve a percentage of every dollar they earn for either a short-term or long-term savings goal. These goals can include things like gaming systems, their first car or even college. Based on these goals, you can explain the differences between saving and investing, then allow them to choose which method is right for a particular goal.
4. Teach Children About Different Forms of Money – Children easily associate the concept of money with physical cash and coins. However, learning that money can exist digitally in your bank account, on your debit card, or even as debt through a credit card, is a harder concept to master. It is extremely important to teach kids how to manage their non-cash money, because our world is evolving to use less cash every day.
To teach children that money is more than just cash, consider paying their allowance, and any other money they may earn, to them in a checkbook register. Teach them how to record all of their transactions and how to determine their current balance.
Then, whenever they need money, have them withdraw it from their register as you hand them cash. If your child can master this concept, hopefully they will not struggle with balancing their bank account or going into credit card debt by using money they do not have.
5. Teach Kids That Money Is Not Everything – Finally, the most important finance lesson to teach kids is the fact that money is not everything. Many people get obsessed with money and the desire to earn or accumulate more of it. Instead, make sure your children know that money is simply a tool to make purchases. It cannot make you happy and it will not lead to a fulfilling life on its own. Friends, family and living life to the full are all important. Money is just a small part of that equation.
These are 5 tips to teach your child to save money and always remind your kids that how they handle debt will affect their credit scores.
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