Start the conversation early
It’s never too early to start teaching your child about money management. Kids as young as 3 can grasp financial concepts like spending and saving. Five-year-olds can learn to recognize coins and dollar values. Elementary-aged children can start to save money in a piggy bank. Tweens and teens can manage a simple budget and open their own bank account. Every shopping expedition is an opportunity to teach your child about wisely spending and saving money.
“The sooner parents can have a conversation about money and its importance, the more likely [children] will be able to value and save it,” says Josh Adams, an economics teacher at Whitmer High school. “Successful people save their money and smart people save for a purpose.”
Adams suggests making budgeting a family affair and setting an example of never spending more than you make. He encourages his students to save 50 percent of their earnings. “Save for a purpose,” he teaches them. “Invest in your future.”
Invest your time with
tweens and teens
While it takes an investment of time and effort to teach money management, the payoff can be well worth it. Modeling fiscal responsibility by paying bills on time and planning ahead when making large purchases allows your child to see wise money management in action.
Dave Ramsey, co-author of Smart Money Smart Kids, reframes the concept of an allowance. “Don’t just give your kids money for breathing,” he stresses. “Pay them commissions based on chores they do around the house. This will help them understand that money is earned— it’s not just given to them.” Allocate the commission like a paycheck and encourage your child to save a percentage for future purchases.
Encourage your teen to get a job so he/she can learn by experience how to earn, save and spend their own income. Teach how to responsibly use credit cards and how to avoid future debt. Teens can also learn about the value of giving through contributions to a charity of their choice. With your support, donating can become a part of your child’s fiscal mentality and encourage social consciousness.
In the end, Ramsey sums it up best: “Teach your kids how to handle money now, and they won’t end up with financial regrets later on in life.”
Visit Dave Ramsey’s website, Smart Money
Smart Kids for more tips and resources.