Although I didn't realize it at the time, I was slowly learning about saving and how to manage money. What people say is true. It's never too early to start teaching kids good financial values. Kids soak in the most when they are young, so why not get a head start?
The concepts and lessons they learn about money will stick with them through adulthood. Here are four of the best lessons to teach kids about finances.
1. Earning an allowance
One of the most common things I hear parents tell their kids is that "money doesn't grow on trees". While that is true, it may be difficult for children to understand.
To help them better grasp the concept, have them earn their own allowance and make their own purchases. Give them a small amount for each chore they complete, and ask them to use it on things they want to get. This will help them learn that money needs to be earned and doesn't just appear out of thin air. It'll also teach them that if they use up the money they earn, then they can't buy anything until they "work" and make more.
2. Saving money with a piggy bank
As kids start earning their allowances, they'll start to accumulate a small amount of money. Teach them to understand the concept of saving by giving them a piggy bank. Or better yet, help them open a savings account at a bank.
Then encourage them to start saving a portion of their allowance money. It will be fun and exciting every time they make a deposit, and it also helps them understand the principle of saving up for the things they want. Plus, now that the savings accounts are starting to give a bit more interest, you can teach them about how money can work for them if they let it sit in an account to earn interest!
3. Enjoying spending money
Having kids spend is important in more ways than one. Encourage your kids to spend the money they save, as it helps them understand the value of money. Money is used to buy things, but it can also create memories and experiences. It's important for children to understand this.
Different things/experiences come at different prices. Allow them to spend a portion of their savings and see what they buy. Then have a discussion with them about the choices that they make. Some things they use their money for are going to be a complete waste, while others will give them a better bang for their buck. There's no right or wrong answer here, as it's just all about priorities. Take the time to coach them and watch their spending habits change over time as they start learning about what matters to them. This will help encourage them to be more financially responsible in the long run.
4. Practicing smart spending habits
Kids learn a lot by example. That's a big reason why you should practice smart spending habits yourself. If they see you spending wisely, they will learn to do the same. And vice versa. Be a good financial role model for your kids to look up to.
You may think your kids are too young to understand the concept of money, but you will be surprised to find that kids can catch on to even difficult concepts very quickly.
Make it fun for them to understand and learn new concepts about money. Pretty soon, they'll be developing good financial habits that will stick with them as they get older.
This article was written by Connie Mei from MoneyNing and was legally licensed through the Industry Dive Content Marketplace. Please direct all licensing questions to firstname.lastname@example.org.