Everyone wants their children to be responsible with money when they grow up, but few do anything to help them gain these skills when they are young. When a child leaves home, they are often bombarded with important financial decisions. Getting into debt early on can make life incredibly difficult for your child, while making responsible choices early can set them up for a successful financial future. There are steps that you can take to help your child be prepared for these situations.
Make them responsible earners
To learn about money, kids should have money of their own to spend and save. An allowance works great for this, but it’s also important that they understand that money doesn’t come from nowhere. Having a child earn their own money can help them understand the worth of a dollar, rather than giving them a set amount each week regardless of what they accomplish.
However, you don’t want your child to start expecting money for work that they should be doing as part of a family, like setting the table and cleaning their room. You may want to think of “extra” assignments that they can do in order to receive their allowance, or have it tied to school and being responsible learners (since that is their “job”). Whatever you decide, make it clear what your child must do to earn an allowance and stick with it.
Use the multi-bank system
If you give a child an allowance and they just put it all into one piggy bank, they are much more likely to spend it all on little things and not practice saving up. If they have a bank for long-term savings (like for a bike, a car, or college), and you teach them to put a portion of every allowance towards that goal, it will teach them to be patient and show them the power of saving over long periods of time.
Allow them to spend their cash
If your kid is getting money, but never spends it because you consistently purchase the things they want for them, you aren’t actually teaching them much. Create certain categories that your kid needs to pay for without your help, such as toys and snack foods. If they understand that they are in charge of making financial decisions, they will learn to make good decisions.
Yes, they’ll screw up. They’ll spend all their money on a little toy and realize that they don’t have enough to buy the bigger item they want. This will give them the opportunity to learn patience and saving. If they make little mistakes when they’re young, they’ll be much less likely to do the same basic mistakes when they’re adults.
It’s always difficult to ensure that your child is prepared for all the problems life throws at them, but a little work and forethought can get your child prepared for the financial situations that arise in life, and will allow them to save their money and make good choices with what they have.
Christine Lukes is a personal finances guru and freelance blogger. She strongly advocates organizing and keep close track of your Bank Accounts for financial peace of mind.