Steps On Teaching Your Kids Proper Money Management Skills
Learning how to properly Manage Money usually becomes an exercise of trial and error. So the sooner that these lessons are learned earlier in one’s life, the better off they are.
Instilling the thought in your kids minds that, “Son, money doesn’t grow on trees,” isn’t the best critical thinking which will set the proper priorities related to the tradeoffs that’s related to money. Our wallets also being an open ATM by handling them twenty dollar bills, whenever they ask, isn’t the solution either.
The actual goal of the “iconic” money should be by cultivating an attitude which values and represents responsible spending habits, developing long-range planning goals, and rewards.
There’s seems to be a fundamental principal that there’s a distinct difference between thinking what you want, and what you actually need. When you expect instant gratification, then nothing feels sacred, and even the abundance of money doesn’t seem quite enough.
Developing Effective Money Management Skills In Children
Once children realize the power that money represents and are given their own bit of cash for them to manage, whether it be their weekly allowance, a set expense for clothing, or vacation money, you’re granting them full and complete control over their financial management destiny.
• To give them a sense of money earned, structure the allowance so they can build their own money management skills, this rather than an actual exchange for chores. Establish an expectation scale where every member of the household pitches in around the home. Then allow your kids to earn “extra money” for bigger or additional chores, such as washing the windows, washing the car, cleaning up the attic or the garage
• Once you establish an expectation scale for your kid’s allowance, then step back as see how that develops. What you’re wanting is your child to be able to experience both the joy of spending properly, along with the disappointment of wasting money
• Since the majority of credit cards will target younger adults, it just makes sense to introduce your kids to the advantages as well as disadvantages of the plastic, this before they actually get one in the mail. The first step is allowing them to have a debit card which is linked to their bank accounts, since it regulates them to spend only what they have
• If your child does receive a credit card, monitoring it is the key. You need to track the monthly statements to decide whether the privilege of credit should be extended. You obviously want your kids to learn from the poor choices that they make, but you never want to have to continuously bail them out of debt.
So the best step may be to allow them to have a pre-paid credit card, which will then place a cap on their spending. Also make sure that they know and understand how interest, the fees associated, and the late payment penalties with credit cards work
• Display to your children how you yourself manage your finances. Show them your reasons and how you establish your household budget, how you write checks, the importance of paying all your bills on time, making the monthly payments to your mortgage, looking for bargains, the weekly sales flyers and coupons etc.
• Teach your kids about savings as well as investment strategies. Even your children at a young age can watch their bank account grow and then even invest in a few conservative mutual funds, bonds or stocks. Hopefully, this will motivate them to invest a bit every month
• Use the Internet as a research tool to teach them why they should do comparative shopping. Once your teen is ready to buy that “big-ticket” item such as a smartphone, encourage them to look online first for the best prices. After they have narrowed down their choices, then either go to that store or order it directly online once the best price is found. Make sure that they know the additional costs involved such as travel expenses, shipping costs and taxes
• Encourage them to get a job once they are old enough. Working will help them understand the value of money earned in exchange for labor, while they’re also developing valuable and practical interpersonal skills
• Instruct your kids to construct a budget for a year. Other than food and housing, have them create a budget for their clothing, transportation costs, entertainment needs, major purchases such as an iPhone, and the related monthly bills, etc.
If you need to, place money into their bank account for them to manage based on their budget. If they run out of money, they won’t go hungry or become homeless, but they’ll learn the value of proper budgeting, spending and saving. They’ll also learn that if more money is required, then they’ll need to work for it