Just like everything else in life, children need to be educated on money, where it comes from and how it works in society. Teaching kids good money skills is something that should be started at a young age so that they will grow with it and also pass the skills on to their children.
A lot of children simply have no clue how or where their parents get money from. All they know is that their parents have money because every time they ask for something they get it, and as such they can have everything they want if only they ask. Therefore it is vital that parents themselves know the kind of lessons to teach their kids about money, especially in the current economic world. Below are ten vital lessons to teach kids about money:
1. Money Doesn’t Grow On Trees
Kids must first and foremost be taught that money doesn’t grow on trees. They must know that money is a trading currency established worldwide and people have to work to earn it. To earn money, one has to trade their knowledge, time, skill and energy in order to get paid. Granted, one could win the lottery, or inherit money, but the basis is people have to work to earn money.
To demonstrate the concept of work, children over the age of eight can be encouraged to start earning money by doing simple things such selling lemonade or even doing simple chores in the house whereby they get paid. Parents can help their teenagers find summer jobs such as mowing neighbors grass or even working part-time delivering newspapers.
2. Control Over Money
Kids should be given some amount of money to control. This can be the weekly allowance parents give. They should also be told to use a portion of that allowance towards certain necessities. This teaches spending habits right from the start so when they grow up they will know how to handle money.
3. Living On A Budget
This lesson can be demonstrated with the allowance money kids receive from their parents. Parent should specify how long the allowance must last for. For example it could be a weekly allowance, so if a child decides to spend the entire money on buying a single item, but end up not having enough money to purchase something they really want later on, the lesson of going over budget is learned right there.
4. Spending Responsibly
Another lesson that parent can teach their kids is how to spend responsibly. Simply because the money is available doesn’t mean all of it has to be blown on frivolous things. For example teenagers who have cell phones can pay for their monthly plan from wages they make doing menial jobs.
5. Saving Money
Children can be taught the concept of saving money by letting them have a piggy bank. The lesson to instill in them is that it is better to have a financial cushion to fall on in times of need. They should be encouraged to save their money to buy items that they really need. This teaches them responsibility.
6. Money Management
Kids should be taught to keep track of their expenditure. Knowing and keeping track on what they are spending their allowances or wages on is a valuable lesson because it will become a habit when they grow up. To help them do this, parents should let them have a notebook where they can record what they spend their money on.
7. Putting Money Towards Good Causes
Kids should be taught on how to share their money with people in need. For instance, during special occasions like Christmas when The Salvation Army collects money for people in need, parents can encourage their kids to donate a small portion of their allowance to help other children in need.
8. Don’t Spend Money You Haven’t Earned
This lesson is about relying on credit cards. It is good to let children know about the existence of credit, but they should also be taught the consequences of the debt trap. If a kid needs a new bike or a game, they should be taught to save towards that purchase on not rely on instant gratification by having their parents purchase it for them.
9. Opening A Bank Account
This builds on the piggy bank concept. As soon as kids reach eighteen, they should be given the responsibility to open a bank account. They can have both a checking account and a savings account. This prepares them to manage their money as they grow older.
10. Investing – It Takes Money To Make Money
Kids should be educated that money is not just for spending. It can be leveraged to yield even more money. The power of compounding interest is something kids should be made aware of so they can invest their money wisely when they grow up.