Introduction to Teaching Children About Money
As a parent, it can be challenging to teach children about financial security and fiscal responsibility, especially when they see you making most purchases with a card or online. However, it’s essential to equip them with good money habits and a solid understanding of financial knowledge to ensure their independence and stability in adulthood. To achieve this, two money experts were consulted for their advice on teaching children the basics of earning, saving, spending, and giving.
How to Teach Children About Money
Teaching children about money requires a combination of strategies, including sharing spending habits, offering a weekly allowance, and encouraging savvy spending. By following these tips, parents can help their children develop a healthy relationship with money and set them up for long-term financial success.
Sharing Spending Strategies
Explaining daily spending decisions to children can help them understand how money works. For example, when using a phone to pay for purchases, children may be curious about how it works. Parents can take this opportunity to explain the process and involve them in comparing products and applying virtual vouchers when shopping online. In physical stores, parents can compare prices and volumes of different products to demonstrate how to achieve the best value. By sharing spending strategies, parents can start building their children’s knowledge and understanding of money management.
Offering a Weekly Allowance
Providing children with a weekly allowance is a classic way to teach good spending habits. According to experts, there is a significant benefit to giving children a weekly stipend. Allowances introduce discussions about financial competence, bank accounts, savings, and even taxes. Many parents start giving allowances when their children are between 8 to 12 years old, and it’s recommended to open bank accounts for them at this stage. This allows parents to transfer money to their accounts instead of handing over cash and coins, teaching children how a bank account works.
Hybrid Allowance System
Some families may not agree with paying children for doing chores, as it can create a transactional relationship. In this case, a hybrid allowance system can be considered, where children receive a small amount of money to manage each week, regardless of their chores. This money can be allocated for discretionary spending, such as cinema tickets, video game upgrades, or Pokémon cards, or saved for larger purchases.
Additional Tips for Teaching Children About Money
In addition to sharing spending strategies and offering a weekly allowance, parents can also encourage savvy spending by involving children in financial decisions and teaching them about needs versus wants. By doing so, children can develop a deeper understanding of the value of money and make informed decisions about their spending.
Conclusion
Teaching children about money is an essential life skill that can set them up for long-term financial success. By sharing spending strategies, offering a weekly allowance, and encouraging savvy spending, parents can help their children develop good money habits and a solid understanding of financial knowledge. By starting early and being consistent, parents can equip their children with the tools they need to navigate the complex world of personal finance and achieve financial independence.