If you have a young child, you may be wondering how early is too early to start teaching your kid good financial sense. The truth is, though, that if they’re old and responsible enough to do basic chores, they’re ready to start learning about money.
Allowance
Many people argue what tasks, if any, money should be given for. Some people like to give a weekly allowance regardless of work being done, or for tasks like helping with the dishes, but the best advice seems to be to give money for any “extra” jobs the child takes on in addition to their regular chores they do to help the family; paying kids for chores can cause them to not view it as part of what they need to do as part of the family and more as an optional task they only have to do when they need cash. If the cash isn’t tied to any amount of work, though, the children don’t learn that money must be earned.
Multiple Banks
Once you decide what you will pay your kid for, you should also consider how much to pay them and how to help them manage their newfound wealth. A common rule is that the child should be able to earn or should be given about a dollar per year of age, though you may want to adjust this. However much they get, help your kid understand the concept of savings by helping them keep two separate banks: one for immediate use on things that they want now, and one to save up for something bigger and more specific, like a bike or even college. It may seem a long way down the road, but they will be able to see that money grow over time, which will help them understand the power of saving wealth.
Teaching Responsibility
Allowing your child to earn money and spend their money as they choose is much more powerful if you don’t purchase everything they want for them. Instead of buying every little toy they see, or constantly telling them “no,” tell them that they can buy it from their own money if they really want it. The child will quickly learn that spending money on one item makes them unable to purchase anything else, and will help them be more careful in their purchases, a valuable lesson for them and a money-saver for you.
Be a Good Role-Model
One of the best ways to teach money-sense is to be a good example yourself. Talk to your child about money, and explain to them your decisions in regards to expenses. If you want to buy something at the store, but you decide that it’s not a good use of money because you’d rather save it for something important, explain your thought-process. If you lead by example, your child will learn this valuable lesson.
Even though your child is young, they’ll be getting older and going off to live their own lives before you know it. It’s important that you take the time now to help them understand the usefulness and the pitfalls of money before they leave the nest, and these skills will help them go on to be successful savers, far ahead of their peers.
Pete Shelton is an avid blogger. If you want to learn more about teaching your kids responsible finances, check out recent articles on USA Broadcast Weekly.
