Most parents understand raising children means preparing school lunches, driving them to sports practice and helping with homework however, some parents may not realize that one of their most important jobs is teaching their kids the basics of money management.
Don’t know where to start? You’re not alone. That’s why we’ve compiled the following tips to help you teach your children how to save, invest and handle money responsibly.
- An allowance is the best teaching tool and experts say it should not be linked to household chores, in which all family members should participate. Instead, use it to make kids responsible for purchases such as toys, movies and school lunches.
- Raises in allowances should be given only if a child’s expenses increase and if they can demonstrate–by documenting their spending– that they really need it.
- Many adults haven’t mastered the art of saving to achieve their goals, but that’s no reason why their kids shouldn’t. Start around the age of six or seven by giving them three glass jars or piggybanks–one for spending, one for short-term savings and one for long-term savings. Open a savings account in your child’s name and explain the concept of interest and why it’s important to put money away every month. Create incentive by matching their savings and going over their statements with them.
- Lead by example. Whether you’re an impulsive shopper or a careful spender, chances are your children will be too.
- Discuss major household purchases with your kids and why you opted to buy one product over another. Ask them for their opinion based on comparison shopping.
- Encourage your children to turn their interests into money-earning activities such as arts and crafts, babysitting, yard work and dog walking.
- Give your child a stake in the stock market by opening an account in their name with a mutual fund that invests in companies they will recognize. Slowly teach basic investing principles by tracking stock prices in the newspaper and linking current events to fluctuating prices.
By implementing a few of these tips your children will learn the value of a dollar sooner rather than later.