Teach kids money smarts

For some parents, to teach a child about money is almost as hard as  some of those other difficult subjects; but understanding what money is, and how to manage it is a crucial life skill parents must pass on to their children. It’s never too early to start to teach your child a solid foundation for making a lifetime of financial decisions. Here’s a few tips to get started.

1) Spending decisions:  Teach your kids know the how and why’s of your spending decisions around the house. i.e, putting things off until you can afford them.

2) Budgeting: Establish a regular allowance that has to last a certain length of time. If you can tie this to earning money, (by doing chores, etc), then the lesson may be established that things don’t come easy, and you have to work for them.

3) Earning money: Teach your child what you have to do to earn money to support your lifestyle. (and the hard decisions this requires at times)

4) Saving money: Teach your child how not to spend all the money you’ve acquired at once, and how to put some away on a regular basis, toward a bigger longer term goal.

5) Earning money on your savings.  Teach your child some options on where to put your money once you’ve saved it, so you can begin to earn interest and accumulate more. (savings account, CD’s, etc) This may encourage your child to save up for something, rather than just buying something on impulse.

6) Comparison shopping: Set aside one day a month and take your child shopping. Teach your child how to compare items based on value, price and quality. Explain why you choose one brand over another. This will help a child learn what things cost and how you decide what amount to spend on which things.

7) Why things aren’t free: Children are continually sent the message today that things are deceptively easy to attain, but no matter what the marketing ads say, things of value are rarely ever free. Ask your child If he or she had something of value, would they be willing to just give it away for free?

8) Monthly payments: Teach your child why some things are purchased with a loan or on credit terms rather than paid all at one time. Explain how your credit card accounts work and mention the greater overall cost of doing so for purchasing on credit terms.

9) Tradeoffs: What you’ve given up to have what you have in your life. Teach your child by explaining some of the tradeoffs you make to stay within your own family budget. i.e. lesser, more economic model of car, so you have more income to take your family out to eat now and then. Explain some of your own money choices, and how you might make different ones than you did if you had some of them to do over again.

"Partners in Financial Literacy for Children"