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We've all heard the phrases “Money doesn't grow on trees” and “A penny saved is a penny earned”. You may have even uttered these phrases to your own children. It's hard to get children to understand the concept of money. They probably think that if you need money you just go to a machine, insert a card and out pops money. Children have to learn that money is earned, saved, and not an endless commodity.
Be a Good Role Model
Another good phrase to live by is “Practice what you preach”. In order to teach children the value of money, you have to be a good role model yourself. Show your children the importance of money by avoiding frivolous spending habits, budgeting your money and practicing comparison-shopping.
As a parent, it is common to give in to children and give them just about anything they want. This behavior can be very destructive because it denies your child from appreciating things that cannot be bought and being motivated to work hard to achieve goals. It is important to learn to say no and be firm.
Teaching Good Spending Habits
The same financial concepts you use in your life can be taught to your children. Setting up an allowance system for chores can teach them the concept of earning money. The general rule for weekly allowances is $1 per year of age.
You can take this a step farther by having them budget their allowance. Encourage them to set aside a specified amount each month for savings either by opening a savings account for them or a good old-fashioned piggy bank. Give them a notebook to keep track of what they earn, save and spend. It is also important to teach children the concept of giving by having them set aside a portion of their allowance to go to your church, or another charitable organization.
Teach them the value of comparison-shopping by taking them grocery shopping with you. The simple concept of having them help you look for the best deals on cereal, cheese or apples can teach them the importance of getting the most for your money.
For very young children it is good idea to allow them to go to the store with a set amount of money to spend. If they want something it has to be within their budgeted amount. Allow them to pay for their own purchases as well. Help them count out how much money is needed and the change they receive in return. This will help them understand the idea of how much certain things cost as well as teach them how to count money.
Praise Your Kids
It is very important for parents to praise children when they practice good spending habits. Just as adults do, most children will eventually learn from experience when they have made poor purchasing decisions. Be careful not to dictate or command purchasing decisions for your children but instead encourage good choices.
Teaching children and young teens to be financially responsible now will translate into a financially stable adult.