Teaching your children about finances and the value of saving is a gift that keeps on giving.
Here are some highly effective money management tips to set them up for a lifetime of financial success:
1. Set up a “three piggybank” system. As piggybanks fill up, children can feel the concrete weight of the money as it increases, allowing them to understand how the value of money accumulates as you save over time.
Take the piggybank method a step further with the “three-piggybank system” and teach children how to allocate a percentage of their money to savings, charity and for spending. This helps create a healthy relationship with money, teaches them the difference between discretionary spending and saving, as well as the long-term benefits of saving for a goal.
How the three-piggybank system works: A percentage of their allowance or money received, that you decided together is acceptable, is divided amongst the three containers.
2. Create a family saving goal. As a family, decide on something worth saving for, whether it’s a kitten or a trip to Disneyland. And make a plan as a family on how you’re going to save. Kids can set aside some of their allowance or do extra chores for loose change. Add to the excitement by making a sticker chart or a savings thermometer for the fridge. Even if your children aren’t contributing, it will help them understand (and set a good example) that even parents have to save for special purchases.
3. Take your children grocery shopping. Coupon clipping had a major moment a few years back and for good reason – it’s a great way to save money while learning about budgets. Taking the kids grocery shopping will teach them how to read price tags and can help you choose products based on the best value for the quantity. Make it fun by celebrating small victories, like who found the best deal or how much the family saved on the grocery bill.
4. DIY back-to-school budget. Kids love the back-to-school season because it means shopping for new school supplies and clothing. Unfortunately for parents it can mean negotiating with their children over whether or not items with inflated prices are actually worth the money. Take the pressure off by asking the kids to help you find the best deals by combing through flyers and doing price comparison-shopping.
For older children, set a budget and ask them to make the shopping list. 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!)
5. An allowance is an opportunity to learn about money management. Think of this as an allowance with a twist. Ideal for older children, allocate a set biweekly or monthly allowance that must cover all of their expenses, including school supplies, field trip costs, new clothes, and school lunches. Children will learn to balance their monthly budget and to prioritize needs, like school supplies, over wants, like new jeans.