Teaching children about responsibility involving money while they are still young are lessons that will benefit them both in the present and in the future. Children as young as three years old are old enough to start learning about responsibility with money. These are some methods that parents can employ to make sure that children grow up with a sound understanding of how to make money and also how to spend money responsibly.
When the child is at an age where the parent believes they are ready to start learning about responsibility with money, parents need to sit down with the child and show them examples of money and start to explain the value of it to them. At this point, it is best to give them as many examples of different bills and coins as is possible. This is also a good time to explain to them how money adds up. As the child starts to develop an understanding of the value of money, take them to a store and explain the cost of things to them.
The second important step in teaching a child to be responsible with money is ensuring that they are aware of the fact that you have to earn money in order to be able to spend money. This would be a good time to start an allowance with the child. There are two different ways that an allowance can be established. The first type of allowance is a flat rate allowance where a child is given a set allowance every week regardless of behavior. The second type of allowance is an incentive based allowance. With an incentive based allowance, different chores that are age appropriate for the child will be assigned a monetary value. As the child performs the different chores, parents can keep a chart or spreadsheet and at the end of the week the child will be compensated based on their work in the home.
It is also very important that children understand that they have to save their money in order to buy the things that they would like to have. Though at times this might be difficult for a parent, it means that the parent cannot give in to every desire that the child expresses. One way to help a child understand the importance of saving money for a larger goal is to allow them to pick out something that they would like to purchase and then work with them to save the money that is required for the item. Another way to help them understand this lesson is to open a savings account with the credit union with their name on it and go over the quarterly statements with the child as they arrive. This will help the child to visualize that money grows when it isn’t touched.
A child that has been taught to be responsible with money from a young age will later find that the transition from the innocence of childhood into early adulthood to go much more smoothly. Children that have been taught how to save money are much less likely to fall into the traps of credit cards and luxury spending.