The type of adult that your children will grow up to become is largely determined by their experiences as a child. This holds true in most areas, and is particularly true when it comes to money. Children who learn money management skills when they are young will often grow up to be responsible adults when it comes to matters of finances. Below are some of the ways that you can teach your child about responsible stewardship of their finances.
If you choose to give your child an allowance, it should not come without strings attached. Your child’s allowance should be earned by doing chores around the home. There are two different ways to provide your child with an allowance. The first is the most obvious one and that is giving your child money in exchange for their performing a set amount of household work. The second, and more innovative way, is to pay your child on a per chore basis. This will enable them to directly tie their effort to a specific amount of money.
It goes without saying that you should start encouraging your child to save early. You should start a bank account for your child where they can save birthday and holiday gifts. In addition, they should save progressively as well. While the concept of a piggy bank seems well-worn, it still works to teach your child the value of money. If you have spare change, you can give it to your child to put in the bank. Clear piggy banks are helpful because it allows your child to see the money as it accumulates.
Discuss Opportunity Costs
It is vital for children to know that money is not infinite. Not only should children be aware of what things cost, but they should also be aware of other things that cost roughly the same amount of money. For example, if your children want to go to a movie, they should be aware of other things that can be bought with that money. This should be done occasionally but not every single time that you purchase something because it may give them anxiety. However, it should be done often enough so your child can understand that it is necessary to make conscious choices about what to do with money.
Instinctually, for children, wants automatically become needs, and vice versa. In a child’s way of thinking, every desire becomes an automatic necessity. As adults know, there are luxuries and necessities in life. The necessities come first, followed by the luxuries. Your child should be taught what they need to have versus what they want to have.
Be Careful About Splurging
While you do not necessarily have to be a tightwad at all times, you should not set a bad example in front of your children. You should be careful about making impulse purchases around children because it may send the wrong message. Instead, you should talk them through your decision process when making a purchase so they understand your reasoning.