Kids like money. They like the touch of it, the sound of it…some even like the taste of it. What they love most of all is the stuff it can buy, stuff that doesn’t always make sense, sometimes really weird stuff, but stuff they must have or else. Your job as a parent is teaching them that stuff costs money.
Here are five ways to educate them about the value of money and the things it can buy. Each will give your child a solid foundation for a lifetime of financial responsibility, common sense and money-management success. Seriously, mom and dad: this is the kind of stuff that really doesn’t grow on trees.
Lesson 1: Teach them how to handle an allowance
An allowance is your kid’s first brush with financial independence. Use it to teach them the principles of saving and budgeting for the things they must have (even though you know they may not really need them).
A good rule of thumb to follow is $1 for each year of age, so a five-year old would receive $5 a week.
Lesson 2: Teach them the value of hard work
While certain chores might be a given in your household, let them know that opportunities abound when they take on a little bit more. Teach them the value of those extra efforts with a monetary reward. Honestly, is there a more effective way of getting the weeding done?
Lesson 3: Teach them about “free” money
Saving can be a bit vague for little ones. By taking your child to the bank and opening an account, he or she will learn how savings and money markets actually work. Periodic check-ins with their monthly ledger is a great way to teach them about compounded interest. As in free money…everybody, open up and say “wow!”
Note: Be sure to let them withdraw a little cash now and then to buy toys and other knick-knacks so they’ll continue to stay interested.
Lesson 4: Teach them to go for their goals
You’re probably still wrapping your own head around the concept of turning 65 one day. Can you imagine what goes on in your kid’s head? Try…where his or her next Spiderman action figure is coming from. Let your child set his or her own goals , and guide him or her towards achieving them. That means, helping them learn the difference between short-term goals (bubble-gum) and long-term goals (an iPad of his or her very own!).
Tape a picture of that must have item to a goal chart, bank statement, or jar so they can make that connection between setting a goal and saving for it.
Lesson 5: Teach them to be a smart consumer
Children are bombarded with messaging – both subtle and loud – to consume, consume, consume. They need your help to sort through the noise. You can teach them the difference between being smart consumers and impulsive ones by setting aside one day a month to take their allowances out for a spend. You can also say no.
Madonna nailed it: we’re living in a material world. But your kids don’t have to be material boys and girls. Not if you start teaching them the value of money, the value of the things they purchase with that money, and the value of setting and reaching goals now.