It really gives kids a head start in life when they learn some basic lessons at home about how to manage money. Here are a few simple steps parents can take to ensure their kids develop a healthy understanding around the value of money and get into the habit of saving and smart spending:
- It is important not to give your kids money whenever they ask for it. Perhaps sometimes explain to them there is no money in the budget that week, so they begin to understand money doesn’t just flow freely from the ATM.
- Giving kids pocket money for various chores around the house is a great way to teach kids the time value of money. That way they can start to understand that if they wash the car and get $5 for an hour’s work, then if they want to download an album from iTunes for $15 then that is worth three hours of their time.
- Encourage your kids to save some of the money they earn or are given. Get them started with a high interest savings account and when the statements arrive, show them how their money is increasing because of the compound interest.
- Be conscious of the way you talk about money in front of your kids. It’s great to be open with your kids and discuss the reasons for your own money decisions, and include them in discussions about what you are investing in and why.
- If there’s something your child really wants, sit them down and work out how much they have saved so far and work out a savings plan. Give them chores around the house to help them earn some extra money if they need to, and you might also offer to match their savings dollar for dollar to help them get there.
These simple lessons are likely to develop smart habits for your kids and will set them up with a savvy understanding of money they’ll be grateful for throughout their lives.