Teaching kids financial responsibility from a young age is important. Teaching children about money will be fun and engaging when they are able to see practical ways in which they develop responsible financial habits.
Managing money is an important life skill, and children who learn how to be responsible with money early on will have better preparation for adulthood. Teaching children about saving money, spending wisely, and making good financial decisions will lead to good money habits that will last a lifetime.
Eighty-eight percent of children learn about money directly from their parents; understand that you are essentially your child’s money role model. Here are seven effective strategies to teach financial responsibility to children from a young age.
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1. Introduce money early
In order to learn about money management, children must first understand what money is and how it works. Introduce the idea of money to children by showing them how money is used to buy things; take them with you when you pay for groceries or pay bills. Parents can model money concepts by talking about what things cost, but using simple terms will help them understand.
Activity:
Children can practice exchanging items for money by providing them with real or play money (if children are too young to work with real money.)
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2. Help children understand saving
Your child must understand that there is a difference between spending and saving because money is not just to be spent! This is vital health information for children in understanding and setting aside dollars from their allowances, or gift money for the purpose of saving for future goals.
Activity:
Use a jar or transparent piggy bank to save money. Allow the child to see their saved money grow over time.
3. Assist Them in Establishing Their Financial Goals
Setting goals teaches children discipline and patience. Let them select something they want - a toy, book or game and create a savings plan!
Activity:
Create a very simple chart to track the savings. Keeping track of their progress will help motivate them continue saving.
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4. Introduce "earning" through Chores or Small Tasks
Earning money is a great way to teach kids the connection between working and earning income. Set up a system of allowance based on completing chores appropriate for their age.
Activity:
Create a chore chart that assigns earnings for each chore; this way they learn that we all must put effort in to receive rewards.
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5. Encourage Smart Spending Decisions
Teach kids to repeat the habit of price checking, ensuring there is quality, and asking themselves if they truly need the item before they buy it. Explain to them the difference between wants vs. needs as it will help them make less impulse spending decisions.
Activity:
Before they purchase something you can ask them three questions, for example:
Do I really need this?
Can I locate it at a better price?
Will I continue to want this in a week?
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6. Teach the Basics of Budgeting
When children learn how to budget their money early, they develop responsible financial behaviors. You want to encourage them to separate their money into different categories – spending, saving and giving.
Activity:
Provide them with a few envelopes. Clearly label the envelopes “spend,” “save” and “donate,” and they will at least be learning budgeting in a visual manner.
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7. Teach the Importance of Giving
It is important for children to understand things such as generosity and how money can be used to help others. This is very foundational and important for children to learn. Encourage them to donate a little of their saved money to a charity, church, or local organization that serves those in need.
Activity:
Allow them to select a worthy cause and donate a small amount of money that makes a difference to help others.
