Sunday, May 25, 2008

Teaching Kids about Money

There are a lot of different ways to teach kids about money. Do not choose the method that you like. Choose the strategies that resonate with your unique child. How do you know what will be effective with your child? Well, the best way to know is to try them out, but we can look at your child's characteristics and try to guess what he would enjoy. Most kids learn better by hands-on activities. Don't lecture them. Let it be fun. Take your child's age and abilities into consideration when deciding what to try. Also, remember not to pressure them to understand or pay attention as long as they are still being respectful. They will get it when they get it.

One way to teach them is to pay them allowance. This way, you can sit down with them and have them help you write a budget. The amount that you pay them should depend on their age and how much they help you around the house. The point of doing this is to give them a watered-down idea of what it is like to manage money as an adult, so they need to be working for their money. My son, who is four, mops, feeds our pets, changes their litter and bedding, and takes out the trash and gets paid five dollars each week. When I feel that he can do all that easily and still have free time to play, I will give him a "promotion" and a raise. He will have more responsibility, but get paid more money.

When they write their budget, they should not get to spend all the money that they get paid. My son, for example, has three jars to put his money in. Every week he puts one dollar aside to give away, one dollar to save, and one dollar towards the bills of the house. Then, he puts the remaining two dollars in his wallet to spend on toys or whatever he wants. The money that he gives away can be to buy a present or card for someone, give to charity, give to a person, or give in church. He gets to decide. The money that he is saving is going to go into a bank account as soon as he has enough saved to open one up. The money in the bills jar usually goes to buy pet food. When we spend the money, I always let him make all the purchases. He counts out the money and hands it to the cashier.

We also have a notebook with a list of his "accounts" (savings account, giving account, bills account, and petty cash). He is beginning to understand simple math so we count on our fingers to do the addition and subtraction for the dollars, and I do the math for the change. This way, we are beginning to use the skills necessary to balance a checkbook. If your child is older, then you can try other more complicated approaches.

A child in third grade or older can pay the bills and record it in your checkbook. This way they can see where all the money goes every month. Be sure that you are with them while they are writing checks to answer any questions they have and be certain that they are doing it correctly before mailing them. Also, you will have to be the one to sign the checks. In the beginning, this may be a little more work for you, but soon you will be able to do other things around the house while she pays the bills. This is a good Saturday morning activity she can do before she goes out to play.

Teenagers can get jobs and keep a budget similarly to the allowance example. Remember, the point of these tasks is to prepare them for the real world. One day they will have to do this on their own and the more experience we give them now, the better they will do later. If you start early, properly managing money will be second nature to them by the time they are in college or in a career.

Be open and honest with your kids about the money situation in your household. If money is tight, they should know that and your spending habits should reflect that. If you are financially secure, you can explain to them that you work hard to manage your money well so that they can have nice things. Let them in on the action so they can see and understand what you are talking about. Your kids will stop and listen to you when they understand through experience that you know what you are talking about.

Not only are you preparing them to take care of themselves, but you are also teaching them to respect the hard work you put into supporting them financially.

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