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So how many of you have kids that think money grows on trees, or maybe just magically appears on to that plastic card of yours?
Mine sure did, and that is when I realized that they needed to get a grip on money, budgeting and finances. It really is not as hard as you may think and here are some tips and tricks for you to use when teaching your children about money.
First of all, maybe you need to change the way you think about money? Money is not a bad thing. Money is a good thing, and can be used in many wonderful ways.
So what did I do when I decided to teach my children about finances?
I Gave them an income
First, I made sure they have money to budget with. My kids do have an allowance every week around $4. That is what they get when all homework is done, behaviour is on point and they do chores I ask them to do when needed. That is how they earn their allowance.
In addition to that, they have the possibility to earn some extra cash by doing things that are “extra jobs” not included in their chores. My kids can get really creative in coming up with ways to earn extra money. My daughter sometimes offers a salon visit and do your hair and makeup for $ 1-2 and I am all for supporting creative ideas and I get a funky hairdo at the same time.
Tracking their money
Every time they get money they write it down in their budget book with dates, amounts and what kind of income it was. That way they can keep track on their income and how much they have in their piggy banks. In that book they also track their spending. I want them to know where every dollar ends up and since they started tracking their money, they spend less of it.
Nothing is for free
Well, most things are not anyway. You better choose wisely on how to spend your money. Make sure your children get to see you doing your budget to make them realize that few things in life are free or comes without effort.
Time is money
I also wanted them to understand that time is money. I told my children that just because you have the cash to buy something you always need to consider how much time it took you to earn that $20 they might want to spend. When they realize it took them weeks and weeks, they are less prone to spend their money on things they really don´t need.
Want vs Need
Let your children make a list of things your family needs to survive and a list of things that are wants. Food is a need, so is housing and utilities. Candy, toys and brand name clothing however is wants. You should rarely spend your money on needs. That money is better of in a savings account . Some day they will wish they had $600 in the bank than 10 Nerfguns, 15 Xbox games and 15 extra lbs of fat on their body from spending money on candy. Just saying…
The power on interest
My kids are now good at saving money and I stepped it up a notch and decided to offer them interest for ever dollar they saved. Every June and December I will give them a 10% interest on the money they have saved at that time. No bank will give you 10% in savings interest but this “Bank of Mom” does, just to teach them how it works. This got them even more fired up and June might be the month I break the bank as they cash in.
Never spend money you do not have
All parents know that children will eventually ask to borrow some money and so have mine and the answer is always “no”. If they do not have the money to buy something, they can not afford it and I tell them to save up or add it to their wish list for Christmas och birthdays.
Some say this is a bit harsh, but getting in to the habit of using money you do not have is like getting on a train going down a cliff – a really bad idea.
I also told them what happens if you borrow money from the bank and how they will charge you interest on that money and that is pretty dumb.
Punchline if you want something save up or let it go.
And since I am not (that) evil, I will sometimes give them a little cash for a special event if they have done well and being wise with thair money, kept up with schoolwork and have a good attitude. They are kids still, but this is a very rare occurrance.
Teach them generosity
Having money gives you the opportunities to help others. Teach your children to become generous givers. This is best taught by leadning by example. You should always give to others.
I hope this gave you some ideas on how to teach your children about money and being responsible with their future savings.