There are so many important skills that we, as parents, need to teach our children to prepare them for life beyond the comfort of their parents’ homes. Financial responsibility is a pretty important one! Unless, of course, you plan on paying your child’s bills until he’s forty. Money management is tricky, even for adults. I’ve put together a few steps to basic money management that will help prepare your child for the inevitable onslaught of bills, budgeting, financing, crediting, and banking that is sure to hit her in adulthood.
Intro to Money Management
Needs vs. Wants
Kids have a hard time differentiating between what is important and what is not. The first step to money management is learning to distinguish between needs and wants. He may want a new video game but he may need a soccer ball. This is an easy way to introduce budgeting. When your toddler is demanding another Hatchling you can use this opportunity to explain that, as a parent, there are certain things you need to buy her and a new toy is not necessary.
To spend money, you need to make money. Give your children opportunities to earn their own cash. You can use an allowance system, pay by chores, put them in charge of recycling, or reinforce positive behavior. There are so many options so pick which form of money making is best for your family. You don’t need to pay them much, depending on the age a quarter a week can be plenty. Think of this like an investment in your child’s money management future.
Savings, Spending, & Givings
Explain the different ways your child can use his money. Keep it simple (no need to start stock exchanging just yet) with these three choices, whether to save, to spend, or to give her money to a person in need or a charity.
Act like a guide to spending when it comes to your child’s money decisions. Don’t force him to buy something or restrict her from a certain purchase. Instead, use your own money spending wisdom and tools to help her make the best money management choice she can. Remind him about how the last time he bought a remote control car he never took it out of the box. Or help her look up reviews for that particular video game.
That being said, if your child is set on making a poor money choice let him. After all, we learn best by failure, right? Allow your child to blow a weeks worth of allowance on hi-chew. You’ll have a great teaching opportunity after the hi-chew high has worn off and his money is gone you. Turn your child’s money mistakes into unforgettable money management lessons.
Don’t Buy All of it
As parents we naturally gravitate towards the spoiling spectrum. I often have to mentally check myself when I am tempted to give in to my sons please for another pair of goalie gloves. I try to justify such purchases as needs because they serve a meaningful purpose. Instead, I use this as an opportunity to let my son spend his money. If there is something your child wants encourage your child to buy it. By purchasing important items your child can feel a sense of fiscal responsibility and recognize the value of a dollar well spent.
Your child will also be more mindful of the items when she buys it with her own hard earned money. When my child carelessly breaks something (now I say carelessly because I don’t hold him responsible for every accidental infraction) I insist he pays to replace the item. If the item is beyond his budget I will step in to assist or we will work together to create a payment plan.
Teach by Example
Sometimes you’ve got to put your money where your mouth is, or don’t. Let your child see your money management in action. When I take my boys to the store I walk them through my purchasing decisions. I’ll explain why I am spending a big chunk of money on a new computer or why I decided to pass on a cute pair of shoes because they were beyond my price point. Take your kids to the bank and let them see you deposit money or review your bank statement with them so they can find out where your money is and just how much you spend on electricity. Who knows, maybe it will help them to be more mindful when turning off the lights.
While nothing dampens my mood like the thought of my children growing up and leaving my home I strive to prepare them for that inevitable and heart breaking day. How are you teaching your child money management? Is there anything I’m not doing that I should be? I’d love your feedback!
Here are a few more tips and tricks for managing money: