Teaching your Child about Finances

Teaching your Child about Finances

Understanding how money works and the role it plays in life is important everyone, even children. During the developmental stages, the child learns the difference between the number of coin and the value of the number of coins. The innocence of childhood grows into the angst of adolescences followed by the hopeful maturity of adulthood but the question becomes how you teach the value of money and finances to your child. Here are some tips to get your little on the right financial track.

An Allowance

To teach your child about money, you will want your child to have a small budget to work with. You may want to start with a small allowance in exchange for chores. Some parents start with as little as one dollar for simple chore such as collect clothes on laundry day or taking trash out to the curb. The small bit of chores your child performs in exchange for their allowance starts the education of work in exchange for reward. Taking the time to explain to your child that the money is for the chores done will teach them to value the money received.

The Piggy Bank

The piggy bank is a cornerstone to your child learning about the value of money and how to save it. You have a savings account where you keep your extra money and your child’s piggy bank is his or her savings account. Take the time to make allowance a ritual in your home. When you give your child the allowance they have earned, have them place this money in their piggy bank with you present. Talk about how they are saving money, what they are saving for, the cost of what they want, and the other things they could do with their money.

Buying

When your children have a bit of money in their savings, you can start to teach them about the cost of the items they want and need. If your son wants a new bat for baseball practice, take him to the store to choose a bat. Let him look at the prices and compare the amount of money he actually has in his piggy bank. If he has enough, talk about how hard he has worked for that amount of money. If he doesn’t have enough money, then talk to him about saving up more to purchase the bat for later. As your child gets older, he or she will develop a healthy understanding for the cost of those items he or she wants in life. When it comes time to buy a car for your teenager, consider matching the money your child has in savings with the amount you can spend to help with this big purchase.

Savings

In the simplest terms, the trick to teaching savings is the process of putting a bit of money away each time you have an influx of income. When teaching this to your child, you want to focus your child’s attention to the action of putting some money away for a later time. Going back to the example of buying the bat, your son might have the money for a toy that catches his eye but not enough for the bat he has been saving for. The impulse of the shiny toy might draw his attention but with a quick reminder of the bat that he wants, you can reinforce the importance of saving for the more expensive bat. As your child gets older, you can introduce the different types of savings accounts, interest rates, and the value of having a rainy day fund.

Charity

One of the hardest lessons to learn is life is that not everyone has the same blessings. Some of us struggle with making ends meet while others have all the financial advantages they could imagine. One of way to learn these harder lessons is through donations to charity. You can teach this through donations of time, items, gifts, and money to charity. As part of your lessons about money, you might have a separate piggy bank for donations where your child puts a part of their allowance. Another technique parent’s use is to have their child give away unused toys during spring cleaning each year.

James He​lliwell is a Finance Expert from www.loanrater.co.uk