Money Management Is An Important Habit To Teach Your Kids

Kids catch onto the importance of money in life pretty quickly as they watch us use it, which means teaching kids about money should be easy!

Here are a few simple tips to use:

Begin when they're young

Begin explaining to your kid how money works from a tender age. It's important for children to understand you get money by earning it. Items (or services) in life are given in return for money, and the price or worth of that item varies according to the seller. If you do not have enough money, you can not purchase the item.

A follow-up to this is talking about saving money. If you child decides to save their money, they can have more choices as to what to do with it. For example, they could buy a better item that can have more meaning and last longer.

Have A Savings Plan

A method to teach youngsters about savings is setting a percentage of their money they should save every time they earn cash. Ten % is a simple sum to learn; simply move the decimal point one space to the left. For each $1.00 earned, $0.10 will be saved ($13.48 earned, $1.34 saved).

This savings plan isn't for a short-term item either, it's purpose is for items that are expensive such as a car, or college fund. The leftover $0.90 can be used for candy or whatever your child wishes to purchase. This principle can teach the child self-control for very long-term savings (i.e. A house or retirement when they are an adult).

When your kid is more mature, take them to the bank with you and open a savings account in their (and your) name. A couple of times a month, take them to the bank so they can deposit their cash into their account.

Educate them on Interest and Credit Cards

Interest is a huge part of using money. One way to show how detrimental or great interest can be is by doing some role-playing exercises. Pick an item your teen currently wants to buy on a credit card. Make a chart demonstrating how making only the minimum payment has effects on the total debt (you may also need to explain APR), how long it takes to pay off the debt with minimum payments, and how much interest is levied in total.

When children understand how cash works they will (hopefully) be more inclined to use responsibility when earning profits choices.