Introduction: Teaching children money values is crucial for securing their financial success. Children learn money management early, primarily by observing their parents or other influential adults. Schools also play a role by offering courses on money management, but the foundation starts at home with values such as earning, saving, responsible spending, and good debt management.
Easy Strategies for Parents:
1. Teach Kids What Money is For: Parents should begin by explaining how money fits into their children’s lives. Make sure kids know money is earned by working hard, allowing them to enjoy the things they see around them. Explain that their favorite toys and dinners come from money earned through work. This personal connection helps them understand the importance of hard work and earning money.
2. Help Them Comprehend the Value of Money: Let children know how much things cost. Start small by explaining the cost of everyday items, like a chocolate bar. Make it fun by comparing prices in terms of items they understand, like how many chocolate bars equal the cost of a car. Ensuring they understand the different values of things helps them recognize good deals versus bad deals later in life. Handling both notes and coins can also help them grasp the value of money.
3. Introduce Pocket Money and How it Works: Once children understand what money is for and how much things cost, introduce pocket money as a way for them to earn their own money. Emphasize that pocket money is not a free handout but a reward for hard work. This approach helps prevent overspending and debt issues later in life.
4. Ways to Earn Pocket Money: Encourage children to earn pocket money by helping with small tasks. Younger children can start with simple chores like feeding pets or watering plants. As they grow older, they can take on more substantial tasks that help around the house, teaching them the value of hard work and earning money for their goals and savings.
5. Share the Cost: Parents can set rules where children must save part of the cost for items they want. For example, if a child wants a pair of joggers costing $100, they need to save half the amount if they want a more expensive pair. This teaches them the value of saving and contributing to their purchases.
6. Start an Investment Plan: Encourage children with part-time jobs to save a portion of their pay into a bank account and consider investing in shares or managed funds as their savings grow. Parents could also buy a small share portfolio for their child, encouraging them to monitor performance and make decisions on buying and selling. Additionally, parents could take a portion of the child’s pay to simulate paying taxes, investing this amount into a savings plan.
7. Teach the Limits of Spending: Parents should educate children about the limits on what they can buy, how borrowing money works, and the cost of debt. This knowledge helps them make informed financial decisions and understand the implications of borrowing and debt.
The information contained in this article is general information only. It is not intended to be a recommendation, offer, advice or invitation to purchase, sell or otherwise deal in securities or other investments. Before making any decision in respect to a financial product, you should seek advice from an appropriately qualified professional. We believe that the information contained in this document is accurate. However, we are not specifically licensed to provide tax or legal advice and any information that may relate to you should be confirmed with your tax or legal adviser.
