It is never too early to begin teaching your children about financial responsibility. In fact, many experts suggest children are ready to start learning about money as early as three years old. In order to best prepare your child for a life of financial independence, it’s important to teach your child about money management. Instilling healthy financial habits will take more than just a piggy bank and some tooth fairy money. Here are 3 money management skills every parent should teach their child.
How to Earn Money
Children should learn at an early age that money is not something that is simply handed to them, but that it is something they must earn. To help younger children understand this concept, make your child earn their allowance. Start by paying your child an agreed amount of money when they complete age appropriate chores. For example, a younger child could earn $1 for putting all of their toys away, while an older child could earn $5 for raking the leaves.
As your child gets older, begin teaching them about entrepreneurship. Encourage them to make their own money. Older children could run a lemonade stand, babysit, or walk dogs to make some extra money. You can take this a step further and help them create flyers to post in the neighborhood or even create a simple business plan.
How to Save Money
For many children, the instant gratification that comes from spending money can be too tempting to resist. However, saving money is one of the most important money management skills that children need to learn. Start by explaining that their money will grow if they don’t spend it.
To teach younger children about savings goals, give them incentives by refusing to purchase that expensive new toy they want. Instead, explain that they must save up enough money to purchase it on their own. Use a glass jar or a simple growth chart so your child can watch his money accumulate over time.
As your child gets older and their savings jar gets full, take them to the bank to open up their very own savings account. Not only will your child become more motivated to save as they watch their savings account grow, but they will also get a better understanding of the value of money.
How to Budget Money
Teaching your child how to budget their money at an early age can have a significant impact on their financial future. If your child is earning an allowance once a week, let them decide how much to save and how much to spend. Have your child keep track of not only the money they’re saving, but also the money they’re spending. Tracking all of their purchases will allow them to see how their spending affects their savings goals.
As your child learns how to track their spending, this is the perfect opportunity to show them how to spend their money wisely. Take the time to discuss a potential purchase before your child buys something. Discuss want versus need, point out how this purchase could affect their financial goals, and review alternative ways that the money could be used.
If you want your children to be able to successfully manage their money in the future, it’s important to start early. Give your children a financial head start by allowing them to earn their own money, showing them how to save, and teaching them how to budget.
If you have questions about how you can set your child up for financial success or if you’re ready to open a savings account for your child, contact a Camino Federal Credit Union Team Member at 1-800-835-3400.