Parenting can be a struggle, even on the good days. It’s not just about caring for your children’s daily needs, but at some point, you realize you are raising the next generation of adults. It’s a rather daunting task to translate the need to be responsible into a language that kids will understand.
Handling, spending and saving money are all valuable lessons that a child needs to learn. These are lessons that will stay with them through the college years and well into adulthood, marriage and children of their own. If you want to raise kids that are savvy about their finances, these lessons must start early.
Set a Budget: Once your child has reached the age of six and begins to learn the nuances of money, it’s a good time to set a spending budget. Party invites, movies and special activities all cost money. Now is the time to discuss how much money is available per event or per month. Set a budget and stick with it.
Start an Allowance: The rule of thumb is $1 per year of the child’s age. A six year old will earn $6 and an eight year old will earn $8 and so on. Whether the allowance is weekly or monthly is up to you. Always give your child cash to handle as an allowance, rather than transferring it from your bank account to theirs. Seeing is believing, and in the case of children, understanding.
Spend, Save and Donate: Kids need to learn that money serves many needs. Have your kids get into the habit of splitting their money for different uses. Allow some money to spend as they wish, some to put aside for long-term savings and some to use for charitable donations.
Donating can be tough for kids, not because they don’t understand; rather, they want to give money to everyone. Put the donation funds into a bank account, and order some special kid-friendly checks, like Hello Kitty Blooms personal checks or maybe sports themed checks. Have your child save their donation money for a year, and then write a check to the top three charities he or she chooses. Top contenders are children’s hospitals, animal shelters and local food banks. Your child may surprise you with the thought and empathy that goes into their choice of charities.
Live and Learn: When it comes to educating children with proper money smarts, they will learn from examples. If you cave when your child whines for a special toy, you will teach them it’s okay to blow the budget. If your child is permitted to dip into savings before the goal is reached, they will never learn financial discipline.
Teaching kids about money is often tougher on the parents than it is for the children. After saving for 6 months to buy a special toy, only to drop it in the driveway can be heartbreaking. Fight the urge to rush out and buy another one. Because knowing how it feels to lose money is an even more important lesson to learn than saving, spending or giving money.
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