Money Lessons Children Need to Learn Early

Money Lessons Children Need to Learn Early - stack of coins image

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As children grow up, there are a lot of important lessons that they will need to learn. A number of these lessons are going to revolve around money. It is important to educate your kids so that they do not make any silly mistakes later in life. After all, managing your finances is not something that is taught in schools. However, you don’t want to overwhelm your child with information, so you need to choose your money lessons with care. Let’s take a look at some of the pivotal money lessons that children should learn early in life below…

You may have to wait to buy something you want – This is probably one of the best lessons you can teach your child, and one of the earliest. You can start teaching them this from the age of three or five years old. It is all about not giving your child what they want straight away. If you go into a store, and your child asks to buy something, or you even want to buy something, make a note of saying you cannot afford to right now, and then purchase it at a later date. This will show your child that you have had to work hard to secure the purchase you wanted to make.

The true cost of every purchase – One of the most valuable money lessons to teach any child is about working out the true cost of any purchase. Rarely any cost is as simple as it seems. There are always extra expenses and costs that may not be financial to think about, such as time. The most obvious example would be buying a house, of course. A lot of young adults think that the only thing they need to save for is the deposit. They are then alarmed when they see other costs. Not only do they need money for a deposit, but they need to factor in expenses on the day of moving, for example, removal services like those from businesses listed on Shiply. They also need to factor in legal expenses, as well as the cost of a professional home inspection.

You need to make choices about how you spend your money – The third and final lesson you should teach a child is that every purchase comes with a choice. You cannot buy everything you want, and it is all about making wise decisions. At this point, introduce your child to goal setting, as well as saving. Set up their own savings jar at home.

Hopefully, you now have a better understanding regarding some of the key money lessons that children should learn from an early age. If you teach your kids the lessons that have been discussed above, you can help to prepare them for the future and you can make sure they learn the value of money from a young age. It is very much about small lessons and baby steps that will ingrain valuable money lessons into your child’s mind so they can carry them forward into the future.

How to make your kids into good financial managers

How to make your kids into good financial managers

These days, kids are getting into debt early. We’ve all heard the stories about students racking up thousands of dollars worth of debt and this can start even earlier when kids are in their teens. With credit card companies offering sweet deals as soon as kids are old enough to sign, it’s no surprise that so many are ending up in debt. But it doesn’t have to be that way. As parents we can do our part to teach children financial responsibility from a very young age. Here are some tips.

Get them a piggy bank

If kids are old enough to get money, then they are old enough to start saving. Get your kids a piggy bank so that they can start saving up the spare change they get from you, the presents from grandma and any cash that comes their way. Encourage them to put most of the money in the piggy bank and leave it there. That gets them started with the habit of saving money. After a while though, the piggy bank will get full and that’s when you move to the next stage.

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Get them a bank account

Your child is never too young to have a bank account even if you have to take responsibility for it at the start. You can make it into a big event to empty the piggy bank every so often, count up the money and deposit it in a bank account. Your child will enjoy seeing the bank balance grow even if he or she has no idea what to do with it yet.

The saving habit

Kids always want stuff so encourage them to take some financial responsibility. When they get money they can allocate some of it towards buying a treasured purchase, as long as they save most of it. Some parents use the matched funding method, where if a child is able to save half the purchase price the parent will pay the rest. This works well for younger kids with less earning potential.

The earning habit

Encourage your kids to do odd jobs to earn pocket money or boost their savings for a planned purchase. Having to earn the money themselves will give them a greater appreciation of what it takes to get it and they are less likely to fritter it away. This is one rule that you may want to apply with care because you have to make the distinction between the jobs that are regular household responsibilities and those which have earning potential.

Take them shopping

There’s nothing to teach your kids the value of money then taking them shopping with you so they can see exactly how much the products you buy cost. This also helps them to compare the relative costs of different brands so when they are older and go out on their own they won’t get a nasty shock. It’s also worth letting them see you comparison shop for household utilities. Let them celebrate with you when you get a cheap broadband deal or save money on electricity.

Encourage financial caution

This is one area where you can lead by example. Let your kids see that where possible you spend no more than you earn. Where you do need to buy something on credit you don’t spend excessively and you do repay it as soon as possible to avoid racking up high interest charges. Letting your kids understand the thinking behind your own money management practices is the best way to help them avoid a future debt trap.

 Celebrate entrepreneurship

There’s more to managing money than simply avoiding debt. Sometimes you have to find innovative ways of making money. So when your kids want to set up a lemonade stand or start a vegetable delivery business, help them to plan and achieve it. However it turns out, they will learn a lot from the experience which will help them manage money well throughout their lives.

Build skills gradually

When children get used to having a savings account, let them move to a checking account once they are old enough. Also consider a debit card or prepaid debit card before allowing them to have a credit card. If you are going to give your kid a credit card then explain how credit works, how interest works and why they need to pay on time. Backed by the other lessons you have given them they will soon be adept at managing their own money.