Everyone must know the value of money and parents should inculcate money management for kids as they will learn to value money in their lives. It is important to build the child’s knowledge on how to save money and the importance of money. Teaching budgeting and money management skills to kids from a younger age will help them develop better money management habits in future.
Let us look at some ways by which you as a parent can teach your kids on how to handle money.
Giving allowance
Children learn about money through various ways when they see parents make a transaction, when they get salary and when they purchase things, but a kid will understand what money truly is when you tell them about it. So the best way to start teaching kids about money and budgeting for kids when you give them their monthly allowance.
Allowance acts as a tool for teaching kids how to save when they want to purchase something with their allowance money. They also learn that if they spend the whole money in advance before the month ends they won’t have any money and will learn to budget. This tool of allowance will come a long way as it shows the consistent flow of money, encourages savings and spending money wisely.
Participation in money matters
As the kid grows older they are building up their knowledge about money and how money should be spent. So they have a working knowledge that money is very important and must be carefully spent. Since they have learned to budget and spend their allowance wisely they are now ready to make small contributions to family finances. Give your kid a small task to manage some household finance like giving a home worker their salary and tracking their attendance. This exercise builds the child’s confidence in managing money and prepares them for their future when they have to run their own household.
Involving the kids in family money matters will bring them a sense of the financial situations at home and how the expenses are managed and how much is saved. This exposure brings the child to understand money matters more and the value of money.
Making savings account
When allowance is given and your kid has money left at the end of the month encourage them to save. You can encourage them to save by letting them know after collecting a sufficient amount they can purchase something or that it will be the money for their college education. This encouragement of saving will make the kid want to save and put in some amount of money every month. For saving money there must be some money left this makes the kids spend on a limit so that they can save some money and will cut back on things they don’t need.
After introducing saving you can teach your kids how savings account works and can open a savings account. Letting them know they can put money in the bank and will build interest, would be safe and they can withdraw the money whenever necessary.
Spending it right
It is important for your kids to know what is expensive and what is worth buying and when it is necessary to spend. When you are going grocery shopping take your kids along with you and let them observe. When you are choosing a product with different prices bring to the child’s notice on why you are choosing that particular one over the others, be it the price quality or quantity. It is important for them to know what is suitable to buy.
It is also necessary to make them aware of the coupons available and how to identify which products have offered so that they can make a smart purchase. After they have seen you shopping for grocery encourage them to go and make purchases for home needs and see if they are on the right track if not take them again with you and educate them on smart buying.
Track the expenditure
Giving your kid money just isn’t sufficient you need to guide them every step of the way and when they come to you for help do it. After the month ends, sit down with your kid and track their expenditure and monitor what they have been doing. When you have a look at their expenses make necessary notes on where they have gone wrong like over spending on one item and frequent expenses they don’t need. You as a parent must ask your kids to cut down on the unnecessary and use the money wisely.
Monthly meetings
After all this process it is important to know to keep the finances in check, it is easy to teach someone to budget but it is more important to see if they are sticking to it. So every 2 months make it a habit to sit down and see that there is a fair usage of money and make changes if necessary.
Summing up
It is important to inculcate in your child how to spend money and manage it from a younger age itself so that they can grow to be responsible adults and can manage their own finances later on without much trouble.
