Money is an abstract idea that we are all very familiar with. Spare a thought then for kids who have no idea how money works or why it exists. From the outside looking in money is a strange beast. It is your job as a parent to explain the dark art of managing money to your children. Here are some tips from money experts that also have children.
Explain the basics of money to your children at a young age. There are really three core aspects of money. Spending, saving and giving. Often when parents give their kids money they will spend it all and that is what parents expect. It is a good idea to give them a little bit more than they need so they can learn the importance of saving. Make them understand that whenever you receive money; a portion should be saved and a portion spent. Take this opportunity to also talk to them about giving. While not a core factor of money it is an important life skill. If you teach your child that whenever they get the money they should put some away to help others in the future this an incredible lesson of how to view charitable behavior. Charity should be the norm.
The next key is to help them start to understand how much things cost and a rough idea of how you earn money. By explaining the relationship between how you go to work every day and how that pays for dinner they will start to understand the value of that food. Consider the fact that children go to school every day and don’t get paid. To young kids what you are doing seems like the same thing.
Give your children the financial space to make a mistake while they live in your home. It is better they learn some valuable lessons now than when they live on their own. They may spend all of their allowances and need to buy something at the end of the week. Instead of caving in, use this moment to show them how important saving for unexpected things is.
Make a connection between an allowance and chores. It is important that your kids do some chores without any expectation of pay, this is part of life and we all have to contribute to a happy clean household. Yet for the extra services that are not normal, they can do this to earn their allowance.
In short, imagine your kids have no idea what money is because they don’t. Slowly show them the world of finances and bit by bit give them more responsibility as well.