Family & Relationships Family & Relationships

Do Your Kids Know How To Handle Money?

Handling money and learning how to use it wisely can be taught to children very early in their lives. Begin by teaching them the different coins and the dollar bills. They can then use that basic knowledge to learn more from the following tips.

1. Play games with them and have a little store in your home where they can "play store" to learn the value of money. Label items with their sales cost and allow them to buy them with money you give them only for this game. They should give that money back to you after the game ends.

2. When it's time for an ice-cream cone, let them learn to find the cost on a menu, and then let them pay the bill. Let them pay the bill with cash at a restaurant. It gets them ready to handle their own money when it's time to get an allowance.

3. Teach them that spending and saving habits are wise to develop. If you explain why you make the decisions that you make, they will learn your spending habits as well as develop the discipline to save.

4. I think it's a great idea to share the family budget with children, although I know there are those folks who don't agree with me. I can see no harm in a child knowing, at a minimum, pieces of the budget - for example, how much gets spent on food on a weekly basis. Teaching them how to read the prices at a supermarket or to look for coupons in a newspaper are habits worth developing and will help your children as they mature.

5. You can divide your family budget into several main subsets. They might be Donations, Investments, Savings, and What Gets Spent. If your child can learn the categories of the family budget, when he receives an allowance, help him to see those categories for his allowance.

6. Giving or not giving an allowance raises a lot of questions: should kids be paid for doing household chores, or should there be a regular allowance just "because" and then an additional amount as a chores reward? I'll leave that one up to you.

7. If you pay your child monthly, it will force budgeting on him or her. They will have to learn the differences between what he might need, what he merely wants, and what he wishes he could have. If you teach your children how to set goals by using budgeting, you will help him to understand what is most important and what is truly not.

8. Buy your child a small bank or find a large jar that you can see through and encourage them to put your coins into it so they can watch the money accumulate through savings.

9. When they get older, I encourage the opening of a savings account. A trip to the bank makes a child feel more adult and they love doing this.

I also recommend not bailing your child out when he spends everything prematurely. No one bails you out if you do that, so let your child suffer through that dry period. It's a great handling-money-teaching tool and you'll develop your child into a fiscally responsible adult.

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