Financial literacy is one of the most vital skills you can teach your children. But it’s easy to overlook in between all the academics and extracurriculars most kids engage in every day. The good news is you can make it a habit – even a fun one – to practice budgeting and managing money. Here’s how!
Kids need money to learn how to manage it.
Most children will love the independence of having a bit of spending power. Once they’re old enough to understand the basic concept of money and some simple math, it’s a good idea to start an allowance.
Many experts suggest giving a dollar amount equal to their age, so $5 a week for your five-year-old. Make sure you give them coins and bills, which they can physically use and manipulate (a number on a screen is too abstract for younger children).
Help them set aside funds every week for savings, spending and giving away.
Learning to delay gratification can help with impulse spending, budgeting and successful money management when your child grows older. A classic place to start saving is with a much-wanted toy.
Help them work out how many weeks they’ll need to save before they can buy it. If they’re particularly impatient, you can show them different scenarios, like the shortened wait time if they increased their weekly savings, for example.
Have a piggy bank or jar available for them to “deposit” their savings. A clear container can help with motivation as the coins grow every week.
There’s a five-dollar bill burning a hole in your son’s pocket. Should he spend it on candy or a new toy car?
Help your child understand what they’re giving up when they choose how to spend their money.
For example, you can remind him that there’s still a sizable candy stash at home, and the car is one they’ve had their eye on for weeks. Or conversely, you can mention the many cars he already has, when three packs of candy can be enjoyed over several days and shared with friends.
Sometimes, seven dollars a week isn’t going to cut it.
If your child is determined to save for a big-ticket item, you can consider offering them a chance to earn some more money.
If they’re already expected to do chores, it may be a good idea to only tie earning opportunities to work above and beyond what they usually do to avoid future complaints.
You can also opt to set a “price” for certain activities, such as video games or a trip to the amusement park, that they can earn money for when completing their chores.
Some board games, like Monopoly, give kids a chance to learn how to manage their play money while reinforcing basic math skills.
A few trips around the board, and they quickly learn what they can afford to buy while budgeting a bit of reserve for when they land on opponent properties. Other games with a bartering focus can also help teach kids valuation. These activities require players to trade items of different value with each other until they can gain a required set.
Learning to budget will take practice and reinforcement. But it’s never too late to help your kids get a head start on mastering this important skill!