When it comes to teaching kids about money, there are many different theories. Some parents believe in starting early, while others wait until their child is older. So, what's the best way to go about it? Well, that depends on your family's unique situation.
Money skills are essential for kids to learn. Not only will it help them manage their finances when they grow up, but it can also teach them about budgeting and responsible spending.
Whatever your situation, If you're looking for ways to introduce your kids to money, check out the tips below!
1. Pocket money
Pocket money is a great way to teach kids about budgeting and saving money. By setting a fixed amount of money to be given to your child every week or month, you can help them learn how to manage their finances and make informed choices about spending. In addition, by teaching kids the value of budgeting from an early age, you can help them develop into responsible adults.
Pocket money is given to children as a regular allowance, typically on a weekly or monthly basis pocket money can help children learn valuable budgeting skills, and it can also be used as an opportunity to teach them about different ways to save money. It can also be an excellent way to encourage children to start thinking about their future financial goals. Pocket money can be a great tool for parents to use when teaching their children about money management.
2. Let them do chores for money
When kids see that they can get paid for chores around the house, they might be more likely to appreciate the value of work. They need to learn that money doesn't grow on trees and that they need to work for it in some shape or form. Pocket money can also help teach kids the value of teamwork and responsibility.
By working together to complete chores around the house, they'll learn how to cooperate and pitch in. And by completing their chores on time and to a high standard, they'll know that hard (or smart as I prefer) work pays off. So pocket money can be a great way to teach kids about the value of work and money. Just make sure you set some ground rules first!
3. Buy special treats occasionally
It's important to reward kids for good behaviour, whether it's at school or home. Sometimes, simple verbal praise is enough, but other times it's nice to give them a little something extra. This could be a favourite treat, extra pocket money, or even a special outing. Whatever the reward, it should be something that the child values and is excited about. This will help them to see the benefits of being good and encourage them to continue behaving positively. In addition, it's essential to be consistent with rewards - if a child knows that they will always receive a treat for good behaviour, they are more likely to work hard to do the chore consciously.
4. Let them invest in their savings account or piggy bank
One of the best ways to help kids learn about compound interest is to let them invest in their own savings account or piggy bank. This way, they can see first-hand how their money can grow over time. If you're looking to help your kids get started, you can open a savings account on their behalf and deposit a fixed amount of money each month. This will teach them about compound interest and instil good financial habits that they can carry with them into adulthood.
Now I understand that interest rates are historically low, and some accounts do not even have the option of gaining interest. But, as with everything in life, things change. There will come a time when interest on savings will return, so having this habit in place early will allow them to reap the benefits of being able to save and collect interest when it becomes available again.
5. Help them sell outgrown games or other small business venture
Kids always seem to want the latest and greatest toy on the market, which can strain your wallet. But there's a way to let them earn their own money to buy their own toys: help them sell some outgrown toys or games online or other small business ventures. This is more than just giving them an allowance; it teaches kids entrepreneurship skills that will benefit them in the future. They'll learn how to set up a business, market their product, and handle money. And who knows? They might even earn enough money to buy that new toy after all. Anything can happen. They might even have fun doing it.
It can also give them a sense of pride and accomplishment from earning their own money. So, if you're looking for a way to teach your kids about business and money, this can be a great option.
6. Give them money to donate to a charity of their choice
There's nothing like a bit of altruism to make you feel good about yourself. And what better way to teach your children compassion and generosity than by having them give back to others? One great way to do this is by giving them money to donate to a charity of their choice. This teaches them the value of giving and allows them to learn about different causes and organizations they may be passionate about.
Not to mention, it's a great way to get them involved in the community and help them understand the importance of philanthropy. So next time you're looking for a way to teach your kids the value of giving, consider letting them give back to a charity of their choice.
When children see the difference that their donation makes, it can profoundly impact their lives and help them develop into compassionate and generous adults.
There are many ways to do this, either by giving them the money or letting them know that they have to give it away and can't keep it, also by making it a rule that a portion of all their income must go to a charity of their choosing. Doing this not only has the positive benefits mentioned above, but it gives them a gentle introduction to tax. The concept of not being allowed to keep everything you've earned has been a hard lesson for many who have just received their first paycheck.
Teach the tax lesson early, and it might save some tears in later life.
7. Let them buy something they want with their own money
Handling money is a skill that plenty of adults still struggle with, so it's no surprise that it can be challenging for kids to wrap their heads around it too. It can also be tough to know where to start. One way to help them learn responsibility is to let them buy something they want with their own money. This could be a small toy or a piece of candy. Then, as they learn to budget and save up for their purchase, they'll also learn about spending wisely. And when they finally get their hands on that desired item, they'll appreciate it all the more. So next time your child asks for something they want, consider allowing them to learn a valuable lesson in financial responsibility.
It's always a good idea to let kids handle their own money. This way, they learn responsibility and how to budget and spend wisely. Even if there are a few hiccups and tears along the way. Of course, it's essential to provide guidance and instruction. But ultimately, it's up to the child to make their own decisions. And what better way to learn than by doing? If they make a mistake, they can learn from it and do better next time. So go ahead and let them buy something they want with their money. Chances are, they'll learn a valuable lesson in the process.
This will help them learn the value of money and how to budget wisely. Plus, when they're older and ask you for money, you can give them the same lecture you give yourself about spending within your means!
8. Teach them how to use a debit card
It's never too early to start teaching your kids about money management. A great way to start is by showing them how to use bank cards. Debit cards are excellent for teaching kids how to manage money because they can only spend what is in their account.
When kids become adults, they need to know how to bank responsibility. You can teach them by starting with a small amount of money and increasing it over time. Then, show them how to check their account balance and ensure they understand any fees associated with using the card.
Additionally, help them understand the difference between debit and credit cards. Debit cards are linked directly to a bank account, so spending is limited to the amount of money in the account. On the other hand, credit cards allow users to borrow money that must be paid back with interest. Teaching your kids how to use bank cards responsibly will help them avoid debt and manage their finances effectively as adults.
9. Help them learn delayed gratification by opening a savings account
Financial responsibility is important for children to learn at a young age. One way to help them understand this responsibility is by opening a savings account. This will teach them patience and financial responsibility, especially if it is a notice savings account. They will learn that they have to wait to get their money out of the account and need to plan when it comes to spending their money. This will help them in the future when they are making financial decisions.
One of the best ways to teach your kids to learn delayed gratification is to help them open a savings account and store the money there, so they have to consciously and actively take the money out of the account before spending it. This will help them understand the value of money and the importance of planning when it comes to money. It's also a great way to teach them about patience, as they will need to wait until they have enough money saved up before they can withdraw it.
With a savings account, they will be able to watch their money grow over time (albeit slowly) and see the drop in the balance when it is withdrawn. And as they age, they can use their savings account to pay for big-ticket items like a car or college fees. So, opening a savings account is a great place to start if you're looking for a way to teach your kids about financial responsibility and delayed gratification.
Bonus Tip
Balance is vital when it comes to motivating kids and money.
Parents often struggle with how to motivate their kids. Some resort to rewarding good behaviour with money, but this can backfire if not done carefully. While it's certainly true that buying your kids the occasional special treat can encourage them to do well in school or behave well, it's essential to be thoughtful about how you use money as a motivator. If you give your kids money every time they do something good, they'll quickly become used to it and expect it. This can lead to entitlement issues and make them more likely to misbehave when they don't get paid. Instead, try using money as a reward for special occasions or reaching big milestones. This will help your kids understand the value of money and appreciate the rewards they receive.
Summary
So, what's the best way to go about it? Well, that depends on your family's unique situation. But here are some solid tips to get you started. Money skills are important for kids to learn - and they're one of the greatest gifts you can ever give your child. Teaching them how to save, spend wisely, and make sound financial decisions will help set them up for a lifetime of success.
No matter what approach you take, teaching kids about money is an important habit to pass on. Money skills can help them throughout their lives, so it's a gift that keeps giving. And the earlier you start, the better.
If you want to learn what it was like bringing two kids through a No Spend Year check out my sell-out book Mindful Money, more money, more freedom, more happiness. Wherever books are sold.