Money Management Tips for Kids

Financial experts teach us to plan a budget and live within our means. They show us how to manage finances and create a stable financial future. They also teach us how to use credit cards without incurring huge interest and overwhelming credit card debt. Let’s look at what these financial experts teach their children and what valuable lessons they put in practice within their own families.

 1. Manage Your Money: Earn to spend:

Financial experts believe that kids should learn the value of a dollar. Most financial experts encourage their kids to work and earn at an early age. It may be simple jobs around the house like  pulling weeds in the yard or vacuuming the carpet, or even selling to friends and family but kids need to learn to earn before they learn to spend. This will teach them to value work.

2. Money Management is all about Choices:

Financial experts take their children shopping so that they learn to spend money wisely. Often a child will ask for something impractical, just because they see it on the shelf. The key is to instill in them the idea that there are choices to live a healthy financial life. We need to help them understand that your income is limited and your wants are unlimited, so you need to have a proper plan regarding how to spend your hard earned money so that you get the best use out of it instead of buying it all.

3. Gratification can pay off:

When a kid earns money he needs to have the gratification of spending it as well. They should be able to spend a portion of whatever they earn any way he or she chooses. This teaches the benefits of money and hard work.

4. Money Management includes Savings:

Kids should  be encouraged in the money management skill of saving a portion of what they earn. They should have a pot of money stored away that is all their own and should be motivated to save 10% of the earnings from their jobs. This saved be saved for a larger item that they really want like a bicycle or electronic gadget or game.  See the article on the Jars method of Saving for more information.

5. Money Management and Giving Back:

Kids need to learn early the value of giving back and tithing. It is an important principle, most money managers believe that if we only hoard our money and don’t give any back to others, we become “financially consitpated” most truly rich people are also good givers.  In addition, around Christmas time, children can be encouraged to give old toys to children who are less fortunate. Doing this, will help children feel blessed and help them to realize that not every kid out there is as well-off.

6. Resources are Limited:

One money management lesson children need to learn is that resouces (and space) are limited. As they outgrow their toys, they should be encouraged to sell them (if they haven’t given them away already) to make room for new ones and to get some spending money so they can buy something that they want more. Encourage children to pick up the toys, books or items that they do not do not use any more and have a yard sale. Kids enjoy the preparation for (and proceeds of) the yard sale and learn many things in the process.

7. Manage Your Money- Learn to invest:

Another key money management skill kids should start learning is about stock investments. Believe it or not many financial experts believe they can start as early as age 13. You can open a brokerage accounts for your children under the Unifor gifts to minors act and maintain control and sit with them and explain it when the statement comes. This way the children learn how to invest in stocks and how to select and evaluate the companies.

 8. Involve Kids in Budgeting:  

Budgeting is a family affair and therefore, kids should be involved. Let the kids in on the discussion of how the money should be spent and on what. Money management experts even want their children to know how much money to be spent on a vacation, home improvements and furniture. This way children help in making decisions about budgeting and savings and know how much things should cost.

 9. Money Management 101- Debt is Bad:

Experts tell us that debt is bad. The best way to impress this on your own kids is to loan them money and charge tham interest. Make it painful. Show them how much of their payment is going toward principal and how much is going to pay interest. I did this with my son when he wanted a bicycle and couldn’t wait until he had saved up enough money. He had received about half of what he needed as Birthday presents etc. So I loaned him the rest and charged him interest on it. Every payment he hated paying the interest and not seeing the balance go down. He ended up paying the loan back early and has hated debt ever since.

10. Think outside-the-box:

Children are naturally creative and they should be encouraged to be innovative in their business ideas and think outside-the-box. A family I know lived in a house that bordered on the 9th hole of a golf course. The kids were always finding golf balls in their swimming pool. So they set up a stand to sell cold drinks and golfballs to the golfers. The golfers found this to be a welcome break on a hot summers day (and the kids made a very good income).