Of course you’ve warned your child to look both ways before crossing the street and you’ve explained to them which foods are healthy and nutritious. As parents, it’s easy to remember to teach these lessons on safety and wellness, but many neglect the essential skill of money management. In this world, financial smarts is as important as any other practical skill your child will need to survive. That’s why it’s your responsibility as a parent to teach your them how to manage and budget money. Excellent money management skills can give your kid the tools needed to hopefully build a stable and secure life; the opposite may foreshadow a path of struggles and instability. To help educate your child on what it takes to be money-minded, cash in on one of these five teaching methods.
1. Play money-minded board games
Learning budgeting skills really can be all fun and games. Lots of board games like LIFE and Monopoly have money-managing elements that can help your child develop their financial skills in a low-risk environment. Games like these allow the opportunity to help your child understand risk management and concepts like interest, rent, and bills in a fun and effortless way. See The Balance for an extensive list of games like these to bust out at the next family board game night.
2. Give your child an allowance
While games may provide excellent practice at making financial decisions, nothing substitutes for real money and real life. If you’re able, consider giving your child an allowance using the web tool at www.threejars.com. The website, which tracks your child's allowance and divides the money into three “jars”. Each jar is labeled for a different purpose: one for spending, one for saving, and one for sharing. By being mindful of where their funds are going, your child will inadvertently learn essential budgeting skills, as well as developing the core traits of selflessness and compassion.
3. Encourage your child to earn money
If you can’t really afford to give your kids an allowance or you’d simply like them to learn the importance of earning, encourage them to make money on their own. The Penny Hoarder has eight ideas for ways that children can earn a little dough, like pet sitting for neighbors or starting a home garden. Who knows, it might plant a seed for a lifetime interest in entrepreneurship!
4. Give your child the responsibility of a bank account
Financial smarts isn’t just about knowing how to make money, it also means knowing what to do with it. On his website, money management expert Dave Ramsey suggests that you give your child the responsibility of a bank account as soon as possible. It opens the door for discussions on saving and provides the opportunity to show your child how interest accumulates. For older children, this can even branch into discussions on investments and returns.
5. Involve your child in your family budget and take advantage of real-life teaching opportunities
Just as Raising Children says, your kid learns financial skills by watching you. This means that the most impacting way you can teach your child healthy money habits is by modeling them yourselves. As your kid watches you, open the door for conversations about budgeting and spending. At the ATM explain where the funds are actually coming from. At the supermarket make a game out of shopping for the best deals. In short, involve your child as much as possible, and keep your eyes open for valuable teaching moments.
The truth is that an education on money management is an investment that will pay off for the rest of your child’s life. Thankfully, learning financial skills doesn’t have to be boring! Involve your kids as much as possible, take advantage of little learning moments, and have fun with it. They’ll thank you in the future; you can bank on that.