Teaching Kids about Money for Life-Long Healthy Financial Habits
Kids catch onto the importance of money in life pretty quickly as they watch us use it. The way to show your child the value of a dollar is by teaching them the different ways a dollar is used.
Begin When They're Young
As soon as your child is ready, start showing them just how money works. Children need to understand that in order to get money, it must be earned. Teach them that the things we need in life like food and clothes have to be purchased with money and that the seller is the one who determines what to charge for the items. If there is no money then you can't buy what is needed.
A follow-up to this is talking about saving money. A child with a couple dollars could go buy a piece of candy (that'll be gone in 10 seconds) or an inexpensive toy (that will be broken in 10 minutes or completely forgot about the next day). However, if that child decides to save those dollars, a better item can be purchased that may have more meaning and last longer.
Have A Savings Plan
One way to teach children about savings is setting a percentage they should save every time they earn money. Ten percent is an easy sum to learn; simply move the decimal point one space to the left. For every $1.00 earned, $0.10 will be saved ($23.48 earned, $2.34 saved).
This savings isn't for a better short-term item, but for a "rainy day" or even a car or college fund. The remaining $0.90 can be used for the candy or "better item" as mentioned above. This principle can teach the child self discipline for very long-term savings (i.e. a house or retirement when they're an adult).
You already know that a six year old could really care less about saving for an emergency or even driving a car, but they will be able to see that saving ten percent over the years adds up. This teaching is a good for when they get their first job because they will already know about putting some money to the side.
You can also share with them about putting some money to the side to give to a charity they are interested in. Concepts like this teach them even more about managing their money.
As Your Child Grows
When your child is older,take him or her to the bank with you and open savings account for them. Decide to take them to the bank monthly so they can deposit their savings into the account. Allow them to view the bank statement so they can see how money is grows with the assistance of interest.
Interest is a huge part of using money. Either it'll make you pay more than what your item was originally worth (credit) or it can help you make more money. Teenagers need to understand that unless you can pay off that debt within 30 days, you'll actually be paying more for your purchased item.
A good way to prove how unfavorable or great interest can be is by role-playing. Find an item your teenager wants to use a credit card to pay for. Create a chart showing how making only the paying the minimum changes what the total debt is, how long it will take to pay the debt off with minimum payments, and how much interest (or money lost), is paid in total.
Then you can take that same amount of months it will take to pay it off and compare the interest they pay with the interest they could earn if they save money for the item. While the interest earned won't be much, your goal is to show them that if they save money to purchase the item, they will only have to pay the cost of the item plus tax, but they won't pay any interest.
The purpose of teaching your child about money is to get them to see the value in proper money management.
Begin When They're Young
As soon as your child is ready, start showing them just how money works. Children need to understand that in order to get money, it must be earned. Teach them that the things we need in life like food and clothes have to be purchased with money and that the seller is the one who determines what to charge for the items. If there is no money then you can't buy what is needed.
A follow-up to this is talking about saving money. A child with a couple dollars could go buy a piece of candy (that'll be gone in 10 seconds) or an inexpensive toy (that will be broken in 10 minutes or completely forgot about the next day). However, if that child decides to save those dollars, a better item can be purchased that may have more meaning and last longer.
Have A Savings Plan
One way to teach children about savings is setting a percentage they should save every time they earn money. Ten percent is an easy sum to learn; simply move the decimal point one space to the left. For every $1.00 earned, $0.10 will be saved ($23.48 earned, $2.34 saved).
This savings isn't for a better short-term item, but for a "rainy day" or even a car or college fund. The remaining $0.90 can be used for the candy or "better item" as mentioned above. This principle can teach the child self discipline for very long-term savings (i.e. a house or retirement when they're an adult).
You already know that a six year old could really care less about saving for an emergency or even driving a car, but they will be able to see that saving ten percent over the years adds up. This teaching is a good for when they get their first job because they will already know about putting some money to the side.
You can also share with them about putting some money to the side to give to a charity they are interested in. Concepts like this teach them even more about managing their money.
As Your Child Grows
When your child is older,take him or her to the bank with you and open savings account for them. Decide to take them to the bank monthly so they can deposit their savings into the account. Allow them to view the bank statement so they can see how money is grows with the assistance of interest.
Interest is a huge part of using money. Either it'll make you pay more than what your item was originally worth (credit) or it can help you make more money. Teenagers need to understand that unless you can pay off that debt within 30 days, you'll actually be paying more for your purchased item.
A good way to prove how unfavorable or great interest can be is by role-playing. Find an item your teenager wants to use a credit card to pay for. Create a chart showing how making only the paying the minimum changes what the total debt is, how long it will take to pay the debt off with minimum payments, and how much interest (or money lost), is paid in total.
Then you can take that same amount of months it will take to pay it off and compare the interest they pay with the interest they could earn if they save money for the item. While the interest earned won't be much, your goal is to show them that if they save money to purchase the item, they will only have to pay the cost of the item plus tax, but they won't pay any interest.
The purpose of teaching your child about money is to get them to see the value in proper money management.
About the Author:
Laura Nelson-Smith is the resident editor of Career & Finance at http://www.Schmoozins.com - an online magazine for women that gives all women a voice. Join us as a contributor, schmoozer or just hang out a while.
posted by Credit Counseling at
1:05 AM
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