Teaching Kids Money Responsibility

It’s never too early to learn about money.  Money makes the world go around.  We need money to live our lives in today’s society.  Kids who learn about money matters at an early age develop a healthy respect for handling it. Here are some usuful tips on how to teach kids money responsibility:

Parents are the first teachers for their kids.  Don’t wait until the unit about money comes up in the third grade math class.  Teaching the importance of money starts at home between parent and child.

Money doesn’t buy happiness, but it does keep one from starving.  Mom and Dad have jobs that pay for the house, the food, the utilities, and everything a family needs.  Kids need to know that their parents are not like money trees that you can shake until enough green falls down for a new bike or a new doll.  There is only money to spend as long as the parents go to work and earn it.

Kids can start with their birthday and holiday money.  Instead of spending it right away, show them how to save the money until there is more to add to it.  Once they have saved enough, they can buy something that they want instead of settling for buying something with the little money they have received at that moment.

It is not enough to know that money exists.  Kids must be able to handle it responsibly.  Create a family budget and let the kids participate in the process.  They will see how their parents divide their money between the bills and leisure activities. 

Ask each child what they want to do for a special event each month.  Setting up a fund for this purpose ensures that there will be money available to finance your ventures.  Kids learn that instant gratification is not the only way to be happy.  Using money the right way becomes a reward for discipline.

Not teaching kids about money can lead to a disaster.  Without proper advice, they could turn to friends who may not be money savvy at all.  Acquiring money without a plan for how to keep it results in a lot of money slipping through the cracks.

Kids that can’t manage their own money will expect Mom and Dad to do it for them.  Whenever they get in a financial bind, they will call their parents to bail them out.  Parents don’t want kids to suffer through unpleasant situations, but kids won’t learn important life lessons when not held accountable for their actions.  Teaching this once the bad habits have been formed will be harder than you think.

Responsible money management doesn’t happen as an adult.  It begins in childhood with that first birthday five dollar bill.  Don’t wait; talk to them now about money.  It matters.

Raising Financially Savvy Teenagers

It’s hard to teach teenagers something that they don’t think they already know.  Parents are seen as ignorant of what is important to them.  Despite what they think, however, parents do know about money and the consequences of using it unwisely.  Show them what you know by teaching them a few things about money.

Parents have experience on their side.  They have dealt with money and the ups and downs that come with it.  Parents can lend insight to teenagers about how to make and manage money.  From day one, they can set teenagers on the right track to understanding the advantages money and good credit can bring into their lives. Here are some tips.

1.  Start a savings account.  When your teenager receives money from their first lawnmowing or babysitting job, take them to the bank.  Saving money is an important part of managing money.  Ask them to give their money a month to sit in the account before they spend any of it.  This will be hard, but one job may pay forty dollars that will be gone in a weekend.  After a month, their savings account may have $200 in it.  That can buy a new outfit and leave some money for a rainy day.

2.  Invest in a certificate of deposit.  When your teenager has accumulated around $500, have them put the money in a CD.  The longer you keep the money in a CD, the higher the interest rate will be for you.  Try a one-year certificate.  After a year, you can sit down with them and decide what to do with the money.

3.  Sleep on it.  When your teenager sees something that they really want to purchase, ask them to sleep on it for a night or two.  Parents know all too well about buyer’s remorse after an emotional purchase.  Implementing the “sleep on it” rule of thumb in your household can save your teenager from feeling that same remorse.  They want a scooter today, but by taking the time to think about the purchase, they may choose to save to buy a motorbike instead.

4.  Develop a financial plan.  Adults are told to come up with a budget for their family, but teenagers can benefit from a similar plan.  Get them to list their wants and needs in two columns on a sheet of paper.  Wants and needs are subjective things, so be sure that you explain the fine line difference.  They don’t have to do it in one sitting.  Give them time to think about it.

5.  After they prioritize their wants, let them figure out how much money they would have to save to purchase it.  To make the process less painful, they can figure up how much money they want to devote per month towards the purchase.  This leaves them disposable income for dates, nights out with friends, and incidentals like gas.

Raising a teenager that understands money is not impossible.  Starting when they are young children lays the ground work for future teachings.  Teenagers that can take control of their money become adults that won’t want for it.

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