Teaching your child about personal finance is an invaluable lesson that can have far-reaching effects on their life and future success. However, with not a lot of cash exchanging hands nowadays, and purchases being made with a simple tap of a card or click of a mouse, it has become harder to teach children the value of money.
Here are some highly effective money management tips to help impart proper spending and savings techniques on your children in the digital age:
One of the best ways to learn more about the value of money is to see it in action. How hard is it to save; what can it buy? These questions can all be answered by setting up a family budget and savings goal.
As a family, decide on something worth saving for, whether it’s a new pet, trip to Disneyland or simply a new bike to spend some quality time together outdoors. Once you’ve decided on a goal, figure out how you’re going to save to achieve it. Set up defined expectations around your child’s contributions and help them come up with ways to make money so that they can save. For instance, kids can set aside some of their allowance or do extra chores around the house for loose change.
Add to the excitement by making a sticker chart or savings thermometer for the fridge. This will help build anticipation while giving them an idea of the amount of time and work involved in saving for special purchases.
As your child gets older, set up a three-tiered savings system and teach them how to allocate a percentage of their money towards savings, charity and spending every month. Help them keep track of these monthly contributions and expenditures by creating a budget, tracking their performance in percentage terms over time.
Once the month is over, assess their performance with them. If they’ve hit their savings goal, consider matching their contributions to a certain limit. This will allow you to teach them the benefits of regularly monitoring their spending and savings habits, while also helping you put money towards their future.
Kids love to shop for new supplies and clothing. Unfortunately, as parents, this can sometimes mean negotiating over whether or not items are actually worthwhile. Take the pressure off by using our connected world to your advantage. Give your kids a set amount of money and ask them to do their research online and come up with a plan on how to spend it. Encourage your child to try and find the best deals and be sure to set expectations by giving them a shopping list.
To spice things up, offer a reward: if they can stay under budget while managing to get all the supplies on their list, they can keep the difference. Suddenly, you might find that they’re a bit more willing to reuse supplies from last year!