As soon as your children are old enough to count they are old enough to start learning about money. The question is, in this electronic age, how can you teach them financial fundamentals when most transactions are handled online or with the swipe of a card. Regardless of how automated your deposits and bill paying transactions are now, your child’s money management skills can start with techniques that are more tangible. Before you graduate your children to electronic banking and debit cards, try these five tips for teaching your child about financial responsibility.
Give your child more than one piggy bank or money jar so that their money can be broken out into savings, spending or specific item accounts. This can help visualize goals, make it clear where the money goes as well as prepare them for their own bank accounts.
If you give your child an allowance or if they get money as gifts for birthdays, make it easier for them to save by breaking the amount into savable denomination. Five $1 dollar bills are much easier to divide among the piggy banks than one $5 bill.
Cost of Living
As your child gets older introduce them to the family’s monthly bills. Children often think money grows on trees and that things that are used daily are free. Sit down and share the monthly bills with them as you pay them. You can choose to start simple with electricity, tv & internet bills and then introduce more complex cost like credit cards & taxes when they are ready. Make a more dramatic point by stacking money on each bill as you pay them.
As your child starts making their own decisions on spending their money help them to document what they are buying and how much they are spending. They will be able to visualize both their good spending and bad spending better with a list that can be reviewed together.
401k Style Matching
Need to give your child a little more incentive to save? Consider matching what they save like a company does with employee 401k plans. You can even set rules on how much or when they can make withdrawals. Start to establish their perspective on the benefits of long term savings as they become more accustomed to their own spending and savings habits.
These are just a few tips on how to give your child a foundation for being responsible with money. Remember to make it fun, involve the whole family and have regular conversations so that there are always opportunities to learn about managing money wisely. Once they’ve grasped the fundamentals you can introduce them to the world of electronic banking, mobile apps and debit cards.