Teaching kids about financial responsibility helps them learn a critical life skill and also gives kids a head start in building a healthy outlook on finances. You can teach money matters to children by giving them basic knowledge and sharing the tools necessary to learn how to save and spend money wisely.
Earning Money - In order to teach your kids to respect money, it is important to set an example by giving kids specific chores or jobs around the house that are age appropriate, and then pay them a specific amount of money for the chore. This can help kids learn about the hard work involved in making money and increase their concern about how they spend their money.
Saving Money - It is important to teach kids how to save money by setting an example for them. Explain how to save money by discussing how much to save and how it should be saved, such as by putting the money in a bank or a pension plan. In a household, it is important to have money set aside in case of emergencies, such as loss of employment, problems with cars, house problems, or other complications.
Risk - When discussing money management, teach your children about risks, such as gambling, the stock market, and other investments. This will help your child learn what impact risky behaviors have on the financial situation of a family or an individual.
Debt - When talking about money matters with kids, debt should be a highlighted area of discussion. When people have debt in the form of credit cards, bank loans, or car financing, there are often fees and penalties for late payments. When someone plans her finances poorly, she may not have enough money to cover her debts, which can lead to problems like repossession, higher interest rates, late fees and other problems.
Coupons - Although coupon clipping can become time consuming, the savings involved is often well worth the investment in time. Teaching kids about saving money through the use of coupons and leading by example can help kids learn how to save money when shopping for necessary household items and food.
Budget - A good way of teaching young kids how to budget is by giving them the example of your own household expenses, or creating pretend expenses to use in a lesson. This can also be done with play money so that children have a sense of how money is allocated. Kids can separate the play money into expenses like housing, shelter, food, utilities, and other areas. The play money can be put into piles to see where the money goes and what is left. This can also lead to a discussion about how the money could have been spent differently on clothing, food choices, eating out, or other optional expenses in order to save more.