Teach Children About Money

By Contrarian Investing

Sow a thought and reap an act,

Sow an act and reap a habit;

Sow a habit and reap a character,

Sow a character and reap a destiny!

As children grow, they are constantly observing people and things around them. This observation power increases over time and they try to emulate the people nearest to them…

Proper money management is a stepping stone to a better future. We do it all the time. We know that our kids try to copy us, won’t it be better to show them how to manage money properly? Here are 10 ways we can teach our children about money:

Photo Credit: Poppy Thomas-Hill

Set a Good Money Example- First and foremost, it is you who must develop the habit of saving money. If you are a spendthrift, then your children will follow suit. So to teach children about money… set a good example.
Stories- Start with telling the children short stories about how saving money helps in the long run. These can be from personal experience, parables or fairy tales.
Demonstrate Conservation- Switch off unnecessary lights, fans and electrical appliances in your home in front of your children, whenever possible. While doing so, specifically explain why it is necessary to do so.
Piggy Banks- Present your kids with a piggy bank. You could give them an allowance and suggest that they save some only spend some of the money. Remind them that they will be considered smart if they can save as much as possible. When they want an item, ask them to purchase it using that money in their piggy banks. Their goal would be to be called ‘smart’, so ask them to think over again and again if they really need that item. Not having enough in their bank will remind them of the value of money.
Create Official Loans– If they want something they can’t afford from their piggy bank. Draw up a loan for that amount. Make it as official as possible with a fixed rate of interest and make the child sign the note for that amout of money. Have all the terms clearly spelled out so they understand what they are signing. Every “payday” they must make a payment on their loan out of their allowance. Ensure that they understand what portion of the payment is going for interest and what portion is principal. Don’t let them miss a single payment no matter what the excuse. This will teach them the pain of debt and reinforce the fact that debt is bad. Allow them to prepay the loan from gifts or other sources to encourage being debt-free.
Deals and Bargains– , Help children understand that ‘deals’ and ‘bargains’ cost less and that comparison of prices is important. But not all deals are bargains if the quality is inferior and the produt breaks when you first get it home.
Transportation Costs Money- if the store is within walking distance of your home, take your children for walks and make them understand the value of exercising. A healthy body is less susceptible to illness; so not only will they value the importance of remaining fit, but also they will come to the realization that getting sick implies giving money to the doctor; for the latter to be avoided, they have to walk that little distance. It follows that they should be taught that vehicles require fuel, which costs money, so wherever possible, they should walk or use bicycles.
Gifts- Teach your children the art of preparing gifts at home. Stuffed toys, creative artwork, a wall painting, embroidered pillow covers, etc., are things that can be easily created at home. Advise them about gifting such items to their friends for birthdays, Christmas, New Year and other special occasions and make them understand that this not only saves money because gifts cost a lot in stores, but also that their friends would be delighted because of their personalized touch; their friendship bond would grow stronger.
Cooking- Teach your children some simple straight-forward cooking at home. The recipe should be healthy and tasty; while cooking you can explain that homemade food is healthier and costs less than pre-packaged food.
Bank Accounts- Open a saving account for your children in a bank once they are sufficiently grown up. Let them be accountable for their account and let them manage the same. They can regularly deposit money from their piggy bank and from gifts. Since debit cards won’t let them spend more than they have in their account, as a teenager they can get a debit card attached to their account to teach them responsible use of plastic. Once they have demonstrated that they can handle that, the next step is a student credit card. Just keep the limit low so they can’t get themselves into too much debt but still can learn how to manage credit.

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