More and more parents accept the importance of teaching kids about money. But they face certain difficulties as they don’t know when is the best time to start teaching them and how to do it smoothly yet effectively.
Some young kids may sell baked goods in their daycare, while older school children can run lemonade stands. As many people can’t boast of living a debt-free life these days, it’s essential to teach our kids how to manage finances and avoid debt. Here are the best professional tips on how to implement new successful tactics and teach financial literacy for kids.
Start As Early As Possible
The earlier you begin teaching kids about money management, the easier it will be for them later in life. Money plays a significant role in our everyday lives, and knowing how to manage and keep track of it will help them avoid debt. If you tell them in detail about the things you are going to buy, why you need them and how much they cost, they will slowly learn how to make good spending decisions, save money and use it responsibly.
Every day parents may start teaching kids about saving money by making them familiar with shopping and financial terms. Go ahead and involve them in the discussion of things you need to purchase and why you can’t buy certain things that aren’t really necessary or cost too much. Show your children how you pay for the goods with cash or credit cards and tell them the difference.
Giving Kids Allowance
Every family is different and parents have the right to decide when they are ready to give allowance to their children. Giving your kids some pocket money after the age of 5 is a great way how to teach kids about money. This solution will help them learn responsibility, financial literacy and everything about saving and spending.
You may also decide how much you are willing to give as allowance. The sum may differ according to the age of the child. Make sure you give more to a teenager but tell them what type of expenses they will need to cover from their pocket money (such as a hobby, entertainment, toys). Start with a lower amount of money and increase gradually if you notice that the kid doesn’t waste it all.
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A good way is to give allowance less often for teens so that they have a chance to learn how to plan their savings and spending. You may decide to give pocket money twice a month, for example. Some parents also choose to give pocket money as payment for certain work or household chores. Make sure your kid understands the rules clearly and knows which chores they do as a family member as which they need to do if they want to get an allowance.
Needs Versus Wants
The last but not least tip is to teach children the difference between their wants and needs. Give examples and tell them to purchase things they need first rather than things they want. Explain how you need to pay for groceries, house, clothes, as well as other basic needs prior to allocating the money for entertainment.
Another way on how to teach kids about money is to explain that things you can’t afford at the moment can be later purchased provided that you save some money and avoid spending spree. This way your kids will learn the importance of living within your means and saving for something they would like to purchase.
Remember to be consistent as teaching your kids about money isn’t a one-time experience. It should be done over and over again until the kid grows up and can be accountable for their own finances.