Start Giving Them a Small Allowance
Everyone says that the best way to learn is by doing. There is no better way to teach your kid to manage money responsibly than by giving them a small source of income.
If you are on a budget or do not want to start with real money, you can always set up a fake economy with paper currency. They can use the paper currency to buy small items you purchase from the store. This is a great way to help them get started on money management.
However, if it is within your financial capabilities, giving them real money will prepare them much better for the real world. You can teach them how to budget, save, and set financial goals with their income.
Many people use this opportunity to teach children the difference between financial wants and financial needs. Some children even use their allowance to start small businesses.
Show Them How to Budget
A key aspect of money management is being intentional when spending money. Showing children how to budget is a fantastic way to do this.
Depending on their age, you may only want to start with a few basic categories. For younger children, you might only arrange the budget into savings, needs, and wants.
However, older children benefit from being transparent about the costs of living. You can use your budget as an example or use the average cost of living in your area, but it is helpful to split the budget into more specific and realistic categories. These new categories could include entertainment, insurance, rent, college savings, and charitable donations.
The best way to teach them how to budget is to lay everything out visually and walk them through your system. Pie charts are a fantastic tool for teaching kids how to budget.
Teach Them How to Open a Bank or Credit Union Account
Teaching children more about banks or their local credit union is another incredible way to show them how to manage money responsibly. Some companies, like Credit Union of Denver, know that responsible money management is incredibly important.
For most people, their bank or credit union is the primary way they store and save their money. That is why it is crucial to teach your children how banks operate, how interest works, and the difference between savings and checking accounts.
Talk About Finance and Encourage Financial Literacy
Finally, it is vital to establish a transparent rapport when it comes to finances and to encourage financial literacy. There are many fun and informative videos online about budgeting with different kinds of salaries all over the world.
By exposing them to these concepts early on in life, responsible money management practices will come naturally to them as teenagers and adults. Keep them apprised about current events occurring in the finance world and explain their impact.
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Additionally, keep them engaged on a personal level. Share examples of financial benchmarks and pitfalls that you have encountered in life. Never treat financial topics as too complicated for them to understand, and they will have an excellent foundation in money management.
Whether you are a teacher in a classroom or a parent trying to start talking about money, it is an amazing idea to use these interactive methods where children can start practicing these habits for themselves.
The best way to learn is by making mistakes, and it’s much better to make mistakes with Monopoly money than with the real deal.
Image Credit: responsible money management by envato.com
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