Teaching kids about money management
Sabah Karimi • March 16, 2020if( has_post_thumbnail( $post_id ) ): ?>
Managing money responsibly is a skill you can teach kids at a very young age. Teaching kids about money may prevent them from joining the masses stuck in a dangerous debt cycle or on the verge of financial disaster.
Being a good role model is a part of the process, and there are several things you can do to make sure your kids are hardwired to manage their money effectively through every stage of life. Looking for financial education for kids? Here are five essential money lessons you can teach your kids at any age.
How to save money? Make smart spending decisions
You can set a good example for kids by showing them how you make an effort to shop around, compare prices, and delay gratification so that you are buying things you actually need. Educating kids about how to make smart spending decisions will help them recognize the difference between buying something after seeing an advertisement for it or hearing about it from a friend, versus seeking out a good deal based on a real need. Teaching children about money often starts with parents.
How to save up for a goal
One of the essential money lessons kids need to learn at an early age is the importance of saving a portion of their income and having realistic savings goals. Setting short-term and long-term savings goals will help kids develop the skill of forecasting with their finances and may even discourage impulse spending. Teaching kids to be responsible with money can help them make savings goals for the future. Encourage kids to write down their goals and review them together regularly to make it a habit. Check out these tips to get kids started saving.
In addition to saving money for things they want, kids need to learn the value of saving money for their future and recognize the importance of putting money into a ‘no-touch’ account where they can keep earning compound interest on the balance. Teaching kids to be responsible with their cash can go a long way. You can demonstrate this by setting up a starter account for your kids and tracking the balance over the course of a few months so they can see how their account grows. Check out these online bank accounts that make saving fun.
Teaching money management by working with a budget
Creating a budget may not be high on your to-do list but it’s a money management tool that everyone needs. Teaching kids the importance of budgeting and working with some type of spending plan can help them understand how to manage their money better. Kids earning an allowance can put together a spreadsheet or chart with a running balance and list their ‘expenses’ to get a taste of the budgeting process. You can make one yourself or find free printables designed for kids online.
Teach your child to live within their means
One of the best practical money skills you can do to show your kids how to live within their means is to spend with cash—or a debit card—whenever possible. Buying what you can afford and refraining from using credit cards just to get by will help kids understand what it really takes to live within their means.
How do you help kids learn smart money habits? We’d love to hear your thoughts the comments below.
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