6 Good Ways To Teach Your Kids About Money Management

Money Management

It is difficult to overestimate the importance of financial literacy for modern people. Financial literacy forms the ability of people to save and invest wisely. We learn how to handle money correctly from early childhood in the family. 

The younger your kids, the easier the presentation of information should be. You can start by explaining that all goods and services have a price, and money is required to pay for these things.

For clarity, you should go with your children to the store and buy groceries together. Ask your kids to find the minimum price for a particular product, or to calculate the difference in cost between products from the same category. You can also set up a “shop” at home because playing is a fun and effective way to teach your children useful things.

It’s essential to teach our children the basics of financial literacy. Let’s take a look at what should be done about this. 

1. Involve your children in family budget management

Start by teaching your children to understand the concept of setting goals and saving them through effective money management. Explain how to manage money your family uses, household budget and expenses, and explain what the family can afford currently. Whether you’re giving your kids pocket money or paying rewards for doing household chores, teach them the basics of budgeting. This includes understanding practical trade-offs, for example, when planning a birthday, kids can choose between a party and a big gift.

Here are some more tips:

  • When setting family goals, include children in discussion and planning. Agree to save on something so that everyone can travel together.
  • Help your children understand the difference between wanting and needing. This will allow them to avoid falling into a debt trap in the future, having a clear understanding of significant and insignificant expenses.
  • Teach children to manage their pocket money. They need to understand that this is a limited resource. At the end of the month, analyze together expenses.
  • Give your children a bank card, which will allow them to get used to non-cash payments and teach such a topic as loans and deposits.

2. Refuse cash with the whole family

Your children repeat all your habits. Therefore, if you want to see the younger generation financially literate, you should start with yourself. Refuse cash, since cashless is the basis of the economy of many leading countries of the world including the U.S. Nowadays, especially in large cities, cashless payments have become an irreplaceable part of life.

3. Explain to your children that money is not the solution to all problems.

The value of money should not be overestimated. It’s obvious that the most important things in life like respect, love, and friendship can’t be bought with them. Therefore, it is better to explain to your children from the very beginning that the world does not revolve around money. It contains many other important, interesting, and worthy things.

Don’t judge your children’s friends by the well-being of their families. Otherwise, your kids will think that a person can be measured in money.

4. Participate in cashback programs.

There are lots of different Internet services that allow you to receive cash back when purchasing certain categories of goods and services online. A number of banks also offer their clients participation in such bonus programs. You can show your children that cashless payments and purchases on the Internet are not only convenient but also profitable.

5. Give your children money for personal expenses

According to statistics, most often children receive their first money in adolescence. However, according to psychologists, the child is ready to make small independent purchases before elementary school. This can have a positive effect on children’s attitudes towards money in the future.

Another mistake that many parents make is giving money haphazardly, for academic success or household chores. But “paying” for everything that, by definition, is the responsibility of children as family members reduce their motivation. If you give money irregularly and haphazardly, then the child will not learn to plan and control finances. All this reduces the educational effect of issuing pocket money to zero.

6. Trust your children

Some parents try to protect their children from financial mistakes, for example, they are afraid to let them go to the store alone. Parents often insist that the child’s pocket money be “insight” – for fear that the child may be wasted or even lost. Basically, children are not in control of their own money.

The result is a decrease in responsibility for cash management and the formation of incorrect behavior strategies. Children either learn to hide money from their parents, or they tend to spend it as soon as possible so as not to lose it due to some unexpected decision of their father or mother. The first one is harmful to intra-family relationships, the second one is bad for the financial future of the child. It turns out that to form the correct attitude of children to money, parents need to start with themselves, that is, to learn to trust the child.