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Teaching Kids to Manage Money - May 2019
While it may seem easy, raising money smart kids is apparently a lot harder than it actually is. If it wasn't so difficult there wouldn't be so many adults struggling with finances, floundering under the weight of debt. That's not the example we want to set for our children.
My parents weren't great on the written budget, but they did set a great example when it came to managing their money. When they wanted or needed something they would shop around for the best possible price and then they would save up and pay cash. I don't remember my parents ever having credit cards and the only loans they ever had were mortgages.
Children learn best by example, especially young children. They love to copy what Mum and Dad are doing so let them see your money management skills and encourage them to copy you.
It is important that they learn from an early age that money has to be earned. Mum and Dad go to work and get paid for the effort they put in. Translate this so they understand: they have a job to do (putting the rubbish out, cleaning the bathroom or whatever is age appropriate). If they do the job properly and on time they are rewarded with pay.
When my daughter Hannah was four years old she desperately wanted a Swimming Olympic Barbie doll. Australia was Olympic mad, Sydney 2000 was only a few months away and everything was geared towards the Olympics including this doll. The doll was priced at $59.95, way out of my budget and way more than I was prepared to pay for a 12" piece of plastic anyway but Hannah wanted it. Boy did she want it, to the point of talking about nothing else.
One day when we were out she spotted the dolls and asked again if she could have one. Being the mother and foolishly thinking I was in control I explained to her that I didn't have money to spend on a doll and that it was a lot of money, more than we had ever spent before on a toy. The disappointment on her little face was heart breaking so I suggested that she could do jobs to earn the money for the doll herself, thinking of course that a four-year-old would never be able to earn $60 before she had changed her mind.
She was so excited. Chattered all around the shops and in the car about how she could earn the money and how much she would need and where to keep it. When we arrived home she pulled out a jam jar and had me right her name on it. That was her money jar and it had to live on top of the fridge.
It took her less than three weeks to earn $60, enough to buy her doll. She did jobs around the house for me - rinsed dishes, took rubbish out, helped to tidy up. She helped Daddy in the yard. She visited with Grandma for a weekend and came home with $7. We paid her to set the table and to clear the table, 25c each. The funniest thing was the look on my brother's face when, after he had finished his coffee, Hannah asked if she could take his cup to the kitchen. "Yes sweetheart, that would be nice," said Uncle Greg. "That will be 25c," said Hannah! The look on his face was priceless but he graciously added to the Swimming Olympic Barbie doll fund.
Every night we would count her money and I'd write the total on a slip of paper for her. As soon as she had $60 off we went to the shops to buy the doll. As luck would have it, it was on sale for $34.95 so she had money left over. This was the transaction that started her love of getting a bargain. She handed over the money herself, all coins and she was so proud. She still has the doll, but more importantly she still works for her money, values it and has built up a nice little savings account earning interest.
My point (I bet you thought I'd forgotten what this was about) is that it's never too early to start teaching kids the value of money. In fact these days, when 2 year olds can have American Express sending them credit card application forms, I believe that as soon as they are aware that buying and selling takes place they should be taught how to look after their money.
As parents we are the main influence in our children's lives and it is up to us to be positive role models for them in all areas including money management. Tempting though it is to want to protect them from the stress that comes with budgeting, by sharing the household budget with them and showing them how the family needs to live within the boundaries set by the budget you are teaching them how to live within their means and setting them up for a positive financial future.
Talk to your kids about money from an early age. Explain to them how you need to earn the money you spend before you can buy what you want. Demonstrate the value of money by showing them what it buys. Take a $2 coin and then go through the junk mail to find everything that $2 will buy.
Take your kids shopping and let them hand over the money or push the buttons on the EFTPOS machine. As they hand over the cash they become familiar with the different denominations and their values and see just what things cost.
Don't be afraid to tell them how many hours Mummy and Daddy have to work to earn the money to buy what they want. Children, especially little ones, want you, not your money. Putting a value on something that directly affects them (time away from them) is something they understand.
Teach children how to compare prices and shop around for the best deal. Encourage them to research a purchase before buying it and be sure to tell them that sometimes waiting a week or two means they will get a better deal on their purchases.
Start a savings account for each child and help them to make regular deposits. We started our children's savings accounts when they were babies and they have kept on adding to them over the years. Once a child understands what money is they are old enough to actively save their own money. A good rule for is to always give 10% to charity, save 10% into a savings account and then use the remainder for spending or for saving towards a specific goal. Getting them into a regular savings habit from the very beginning ensures they will carry it on as they get older.
Children are little sponges and are so open to learning, especially about money and how to manage it. It's up to us to make sure they learn from our experience (and our mistakes) so they will grown into financially responsible adults.
Your children can manage their money exactly the same as you do.
Teach them the 10-10-80 method. Show them that giving 10 percent is being generous to those who are less fortunate. Let them see that if they regularly save 10 percent regularly their savings will grow quickly. Teach them to live on the remaining 80 percent, to use it to fund their wants and needs, and as adults they won't find themselves living above their means, battling debt.
A simple way to get started is to create a Money Folder for them. Use an A5 two ring binder for each child Inside it put 3 envelopes:
1. Donations 10%
2. Savings 10%
3. Money to Manage 80%
Each week when they receive their pay, have the children divide it into the envelopes immediately, just as your pay is divided into your various accounts in your Spending Plan.
To do this you will need to be on the ball and make sure you pay them in the correct denominations so they can divvy up their pay easily. Remember, if this becomes too hard for them they'll stop doing it, much the same as when working out our Spending Plan becomes too complicated we stop using it.
Encourage them to write down what they spend their Money to Manage on. Slip a sheet of paper into that envelope and have them record the date, how much and on what they spent their money.
Kids will react much the same way you do when you track your spending: they will look at what they have spent and what they have spent it on and realise they could be making better choices.
They are learning to manage their money. And they are learning at your hand so that by the time they become adults they will automatically give and save, possibly more than 10 percent, and know how to live beneath their means.
You will have raised a debt free, cashed up kid who will be laughing all the way to the bank. And you can be proud because they learned from your example.
My parents weren't great on the written budget, but they did set a great example when it came to managing their money. When they wanted or needed something they would shop around for the best possible price and then they would save up and pay cash. I don't remember my parents ever having credit cards and the only loans they ever had were mortgages.
Children learn best by example, especially young children. They love to copy what Mum and Dad are doing so let them see your money management skills and encourage them to copy you.
It is important that they learn from an early age that money has to be earned. Mum and Dad go to work and get paid for the effort they put in. Translate this so they understand: they have a job to do (putting the rubbish out, cleaning the bathroom or whatever is age appropriate). If they do the job properly and on time they are rewarded with pay.
When my daughter Hannah was four years old she desperately wanted a Swimming Olympic Barbie doll. Australia was Olympic mad, Sydney 2000 was only a few months away and everything was geared towards the Olympics including this doll. The doll was priced at $59.95, way out of my budget and way more than I was prepared to pay for a 12" piece of plastic anyway but Hannah wanted it. Boy did she want it, to the point of talking about nothing else.
One day when we were out she spotted the dolls and asked again if she could have one. Being the mother and foolishly thinking I was in control I explained to her that I didn't have money to spend on a doll and that it was a lot of money, more than we had ever spent before on a toy. The disappointment on her little face was heart breaking so I suggested that she could do jobs to earn the money for the doll herself, thinking of course that a four-year-old would never be able to earn $60 before she had changed her mind.
She was so excited. Chattered all around the shops and in the car about how she could earn the money and how much she would need and where to keep it. When we arrived home she pulled out a jam jar and had me right her name on it. That was her money jar and it had to live on top of the fridge.
It took her less than three weeks to earn $60, enough to buy her doll. She did jobs around the house for me - rinsed dishes, took rubbish out, helped to tidy up. She helped Daddy in the yard. She visited with Grandma for a weekend and came home with $7. We paid her to set the table and to clear the table, 25c each. The funniest thing was the look on my brother's face when, after he had finished his coffee, Hannah asked if she could take his cup to the kitchen. "Yes sweetheart, that would be nice," said Uncle Greg. "That will be 25c," said Hannah! The look on his face was priceless but he graciously added to the Swimming Olympic Barbie doll fund.
Every night we would count her money and I'd write the total on a slip of paper for her. As soon as she had $60 off we went to the shops to buy the doll. As luck would have it, it was on sale for $34.95 so she had money left over. This was the transaction that started her love of getting a bargain. She handed over the money herself, all coins and she was so proud. She still has the doll, but more importantly she still works for her money, values it and has built up a nice little savings account earning interest.
My point (I bet you thought I'd forgotten what this was about) is that it's never too early to start teaching kids the value of money. In fact these days, when 2 year olds can have American Express sending them credit card application forms, I believe that as soon as they are aware that buying and selling takes place they should be taught how to look after their money.
As parents we are the main influence in our children's lives and it is up to us to be positive role models for them in all areas including money management. Tempting though it is to want to protect them from the stress that comes with budgeting, by sharing the household budget with them and showing them how the family needs to live within the boundaries set by the budget you are teaching them how to live within their means and setting them up for a positive financial future.
Talk to your kids about money from an early age. Explain to them how you need to earn the money you spend before you can buy what you want. Demonstrate the value of money by showing them what it buys. Take a $2 coin and then go through the junk mail to find everything that $2 will buy.
Take your kids shopping and let them hand over the money or push the buttons on the EFTPOS machine. As they hand over the cash they become familiar with the different denominations and their values and see just what things cost.
Don't be afraid to tell them how many hours Mummy and Daddy have to work to earn the money to buy what they want. Children, especially little ones, want you, not your money. Putting a value on something that directly affects them (time away from them) is something they understand.
Teach children how to compare prices and shop around for the best deal. Encourage them to research a purchase before buying it and be sure to tell them that sometimes waiting a week or two means they will get a better deal on their purchases.
Start a savings account for each child and help them to make regular deposits. We started our children's savings accounts when they were babies and they have kept on adding to them over the years. Once a child understands what money is they are old enough to actively save their own money. A good rule for is to always give 10% to charity, save 10% into a savings account and then use the remainder for spending or for saving towards a specific goal. Getting them into a regular savings habit from the very beginning ensures they will carry it on as they get older.
Children are little sponges and are so open to learning, especially about money and how to manage it. It's up to us to make sure they learn from our experience (and our mistakes) so they will grown into financially responsible adults.
Your children can manage their money exactly the same as you do.
Teach them the 10-10-80 method. Show them that giving 10 percent is being generous to those who are less fortunate. Let them see that if they regularly save 10 percent regularly their savings will grow quickly. Teach them to live on the remaining 80 percent, to use it to fund their wants and needs, and as adults they won't find themselves living above their means, battling debt.
A simple way to get started is to create a Money Folder for them. Use an A5 two ring binder for each child Inside it put 3 envelopes:
1. Donations 10%
2. Savings 10%
3. Money to Manage 80%
Each week when they receive their pay, have the children divide it into the envelopes immediately, just as your pay is divided into your various accounts in your Spending Plan.
To do this you will need to be on the ball and make sure you pay them in the correct denominations so they can divvy up their pay easily. Remember, if this becomes too hard for them they'll stop doing it, much the same as when working out our Spending Plan becomes too complicated we stop using it.
Encourage them to write down what they spend their Money to Manage on. Slip a sheet of paper into that envelope and have them record the date, how much and on what they spent their money.
Kids will react much the same way you do when you track your spending: they will look at what they have spent and what they have spent it on and realise they could be making better choices.
They are learning to manage their money. And they are learning at your hand so that by the time they become adults they will automatically give and save, possibly more than 10 percent, and know how to live beneath their means.
You will have raised a debt free, cashed up kid who will be laughing all the way to the bank. And you can be proud because they learned from your example.