Miriam Slozberg
It is crucial for parents to help their children understand the value of money, as well as help them develop a positive relationship with money. The younger that children are taught this important lesson, the more likely that they will become financially stable as adults.
The time will eventually come when they will end up going into debt for a legitimate reason such as taking out a mortgage for a home they purchase or require a car loan to buy a car. They will be more likely to pay their debts on time, and as a result, they will develop good credit as long as they are taught the value of money early on. Below are five effective ways parents can teach their children the value of money.
1. Show your Kids how Crucial it is to Save Money.
I believe that is the first step to help your children know the value of money. In fact, you can teach them to save as soon as your children learn how to count. That is when you can first introduce them to money and explain to them the worth each dollar bill and coin.
When they are old enough to understand, you can then teach them how much each dollar and coin is worth in relation to other coins and dollars.
2. Teach your Kids how to Pay for Items and Help them Understand the Difference Between a Need and Want.
The first step to doing this is that kids need to be aware of the difference between needs and wants. And they need to understand money must be spent on needs first, and how wants are luxuries that come second. Take your kids to the supermarket, because they will learn you need good healthy food to live, instead of taking them to a toy store where they will only learn they can buy what they want, hence a luxury.
Kids must understand that it is okay to buy a luxury item (a toy or candy) occasionally with money saved up as a reward for something. In fact, it is crucial that they are given the opportunity to enjoy luxuries every now and then. The earlier on they are taught it with consistency, the less likely they are to rack up credit card debt when they are adults and be in a situation where they are unable to pay for the debt accumulated.
The same will happen if children are not given the opportunity to buy the occasional luxurious item due to feeling deprived later on and therefore will increase the risk of them going into debt as well.
3. Teach your Kids About the Value of Buying Things on Sale.
In some cases, you cannot be picky when it comes to necessities such as food. This applies more so to luxury items because it is important that they understand that if they want to buy a certain toy or candy, they have to go to a certain store to buy it because it is on sale and cheaper than it is elsewhere. If kids pick up the importance of looking for sales to save money, they will carry that good habit through life and save their own money in the long run.
4. Give Kids an Allowance for Chores.
After teaching your kids about how you handle your money and they see a positive example that you have given them, they can have the opportunity to make their own money by doing certain chores. Set limits on how much they spend as well and go back to the “needs vs wants” discussion if you must.
Kids will not be expected to buy groceries but they will want candy and toys. They can have those luxuries occasionally but that is when limits need to be set. For instance, the rule is the child must earn $30 of allowance money before they can spend $10 of it on what they want, and the rule is they must save the remaining $20.
5. Open up a Bank Account for your Child.
If your child is earning a weekly allowance, before he or she spends any of it, open up a bank account for him or her there so he or she can deposit the money every week. This way your child will know how much is saved, and then if there is more than enough in the account to indulge in an occasional luxury. Then your child will love that, appreciate that, and enjoy the new toy or candy.
Teaching kids to save money early on has far-reaching effects into their future. Before they even have to deal with financial issues independently, they will already know what the wise decisions are to make in regards to spending their money.
They will know the value of money and they will know not to waste it on frivolous items. Kids should also know how saving money can secure their family’s future, and the younger they can learn (according to their development), the odds of them becoming financially secure adults is much higher.
