Teaching kids how to save money while they are young can ensure their financial stability in the future. Here are some important money lessons to introduce to your children:
Explain Differences Between Needs and Wants
It’s vital to explain the difference between needs and wants to children. Inform them that there are items they need, like food, clothing and shelter, and products they want, like sweets, games and movie tickets. Teach them to always put their needs before their wants.
Teach Them Why They Should Save Money
It might be hard for children to understand why saving is important because they may not be thinking long-term. Use real-life examples to explain why it’s important to have a financial cushion.
Give Them a Weekly Allowance
Giving kids a weekly allowance is the first step in teaching them smart money habits. However, before you give them a weekly stipend, ask them what their short- and long-term goals are. In the short run, they may want to go to the movies with friends or buy some candy, however, if they want an expensive gadget, like a tablet, they need to save money. For example, if you give them $20 a week, have them put $10 aside until they save enough to buy what they want.
Monitor Their Savings
Each week or month you should be monitoring your children’s spending habits to see if they are right on track. If they’re living allowance to allowance, you may need to have another chat with them about saving money.
Allow Them to Make Mistakes
Kids aren’t perfect, so they’ll make mistakes from time to time. In fact, mistakes are how young people learn to make better choices. So don’t become upset if they spend all of their allowance money on the first day of the week. Remember that this is just another opportunity to explain to your child why they need to space out their spending.
Open a Savings Account
Savings accounts are great for helping people not spend money. Take your child to a bank that has a program for young savers. Put the account in your child’s name so they can feel a sense of responsibility. Each month, review the bank statement with your child to see how well they are saving. Also, inform your child that the more money that is put in the savings account, the more interest they will earn. This can be a great incentive to set money aside.
Help Them Balance Their Bank Accounts
If your teen has a checking account, make sure they are balancing it regularly to monitor their spending. This also forces your child to examine the purchases they made, because he or she will be able to see each itemized product or service.
Give Them a Lesson on Credit Cards
Once your teen turns 18, they will be eligible for credit cards, so inform your child how they work and why it’s important not to rack up a large amount of debt. However, it might be beneficial to let your child open up a credit card so they can build up good credit, but make sure it has a low spending limit in order not to over spend.