Teaching financial literacy for kids can be difficult at first, but if done consistently, can be life-changing for your little ones.
Consider this: The average credit card balance for a single card in 2019 hovered around $6,000, and in 2016, the total average amount of credit card debt per person was around $16,000. Clearly, the value and proper maintenance of money needs to be taught. As parents, it’s our job to teach our children what they need to know.
Here are some simple budgeting techniques to teach your kids about the importance of money.
Teach the Relationship Between Work and Money
How to teach kids about money begins with things they want (and not things they need — that comes later). If they’re really young, you may even need to teach them about money before anything else.
Then, the next time your child asks for a new toy, give them a task to complete to earn money and save up for it. If it’s not in their nature to ask for anything, plant the idea in their head.
The scope of the job is up to you, whether it involves feeding the dog every morning or picking up the mail each afternoon. You know what your child is capable of. To teach them patience and the art of saving up for something they really want, pay them enough to feel that the toy is in reach if they do a few more jobs for you – but not enough to fully fund it right off the bat.
Make sure the job is not too hard or too easy. If it’s too easy, they won’t consider their money hard-earned, but if it’s too hard they’ll lose interest altogether. You have to find the sweet spot.
Don’t extend credit no matter how much get pressured. Once your child has completed the work as you specified, then you pay them for a job well done! If it’s a chore they have to do each day, pay them once a week on the same day each week.
Set an Example
Kids learn by example. So the next step in budgeting for kids is for you to save for something that you want, too. Perhaps each week you save with your child toward a new coat or book you really want.
Position it so that you are saving at the same rate as them, and that you both will have enough money to buy your wants at the same time.
A really good tactic is to create two clear jars with your names on them. Once a week, count out your money together, and count the expected number of days you have left until your big purchases.
Teach About Impulse Buys
After your child has gotten into a routine of making money and saving, put them in charge of all of their personal purchases. Also make them use their own money for small impulse buys such as candy bars.
Allow them to make a mistake or two before you sit down to talk with them. Explain that small purchases can really eat away from their savings and extend the amount of time it takes to reach their goals.
To get what you really want out of life, sometimes you must do away with small wants to make way for big rewards.
Teaching kids about money never stops (ask any parent of a college graduate). As they get older, have them start saving their money for future expenses such as college or their first car.
When they become adults, they’re likely to thank you.