Teaching children money management is one of the great skills I learned from my parents was money management. Lessons such as how much money it takes to buy certain things, how to set up a budget, being mindful that what goes out better not exceed what comes in, and self-esteem from inside, not from accumulating ‘stuff’ on the outside. These are linked, but separate skills, that can be taught to our children while they are young without needing a degree in Finance or any degree at all.
Here are 6 tips for teaching your children about money, budgeting, and that while love is free, stuff is not!
6 Tips for Teaching Children Money Management Skills
1.) Discuss money and income
My parents often discussed their income and money in general at the dinner table. We did not need to schedule a family meeting, because most nights we had one while eating together. It was natural, it was just what we did. My brother and I asked questions to chime into the conversation and were respected and trusted enough to be given the answers to questions we had: “How much money do you make?” “What does a car cost?” “Why can’t we get a toy when we go to the store?”
2.) Don’t buy new toys every shopping trip
I rarely buy my children toys or other items when we are running errands. Teaching children money management skills has to begin with the idea that just because you want something does not mean you can always get it.
We have had tantrum fests in the middle of Target because I have put ‘no’ on repeat. I am not saying that we NEVER let them pick something out, but we are mindful of when we last did allow them to pick something, and how close we are to a holiday where they will be receiving gifts, not to mention the greater point of what the excess funds look like at the time. This post about teaching children to be responsible with money
has some great tips on this topic too.
My son used to often see something he thought he could not live without, and we ended up doing the ‘no-on-repeat-leads-to-tantrum’, but he has learned that money is required to buy things.
3.) Assign your child chores
After my son started asking questions about money and asking about buying things at the store, my husband and I decided to start giving my son chores
and paying him once a week for doing them. He started feeding the dog once a day and he earned a dollar a week at about 3 ½ years old. This is a couple of years younger than I was when I started receiving an allowance, or commission, from my parents.
We ramped up his duties now that he is older, so that he experiences increased responsibility and increased ability to grow his nest egg.He still has to clean up his toys before bed, and help out around the house in other ways, but those things receive verbal thanks and praise. I want him to develop the idea that helping will not always earn money, and I want him to help even if he is not being paid.
4.) Set up a savings account for your child
At birth, we had an account set up (just a simple savings account,) so that money gifts and our additional savings for his (hopefully) future college had a place to go. My son is already learning that work when completed well = pay and pay gets saved FIRST. (Ever heard the line: “Pay yourself first?”)We did not start allowing him to use his allowance money to buy things he wants until around 6 years old. We teach him about donating 10% and saving 10%, first. We encourage him to save everything “for college” for now. His basic needs and more are met by us and extended family for the time being.
UPDATE: Around the age of 5-6 years old we start letting the kids buy things that they want with some of their money earned from doing chores or jobs around the house. When I pay them weekly, I take 10% of their income and put it in an envelope marked “Donations,” and put another 10% in their savings account. These percentages come from their money, not extra paid out by us. The rest, they can save in a wallet to use when they want to go to the store and buy a toy or new item.
5.) Don’t be afraid to answer your child’s questions about money
When they are in Elementary school, around 10 or so years old, they may be trustworthy enough to know what your household earns-if you are worried about them sharing. Teaching children money management has to be based in reality with real numbers to compare and learn from.
My parents always mentioned to us, “You don’t need to tell anyone. It’s not their business; it’s only for us in the family to know.” I think that is a fair lesson to teach as well. You can’t guarantee that they will always remember what you teach them, but it is better to teach and not need rather than not teach and have your child miss out on a lesson.
6.) Be a good example
Of course lessons on money and frugality must be modeled by us, the parents, in order for the full effect to stick with our children. We often tell our children, “When you make your own money, then you can buy what you want,” when we hear whining for not meeting their demands.Life is about moderation. This blog is to support that: Easy activities that won’t break the bank or even require you to buy anything, motivation to stick to the lessons you want your children to learn, and living as the example.
We are not merely raising children; we are educating future adults. The lessons we show and teach now, will benefit our children because they will have the knowledge necessary to meet the demands of life. We will leave them grasping for easy answers and latching onto peer pressure if we do not teach when we have the chance.
Teaching children money and how to budget. It’s nice to have nice things, new things, but it is only nice when the price for them can be paid. That is a life lesson that gets missed.
Love is easy to give, and does not cost a dime, but many things in life do cost dollars and cents, and we should teach our children this vital lesson.
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