Step 1: Start from the beginning
As soon as your children are able to understand money management they can be guided into understanding that to secure their future outside of the maternal and paternal home that they must manage wisely. Imagine if your child responsibly begins saving at the age of seven years old, perhaps a dollar a day.
By the time your child has reached the age of eighteen they will have over $4,000 of their own personal money. While that may not seem like a large amount of money, it is larger than what they would have had had they not saved at all. The key to raising children that understand that they must be wise with their money is to start from when they are still young and impressionable. Games, books and other mediums can be used to instill these values into your children so that this knowledge grows with them as they grow.
Step 2: Help them create
Another great way that you can teach savings and money management to your children is to help them create a budget and/or savings plan for themselves. For example, if your child receives an allowance of $20 per week, arrange with them to retain $5 from their allowance to be put towards savings.
Continue this habit for a couple of months and then, as a lesson, show your child the amount of money they have in their savings ‘account’. This exercise will allow your child to see that even though they only removed a small percentage of their money each week to be saved, over time that small percentage would have grown into double and triple the amount of money they initially received.
Savings charts and posters are another great way to track your child’s savings and earnings. Record all of the money that your child receives and spends onto a chart that is placed somewhere that your child can see. In this way, a good savings habit will be clearly shown on the chart, while a poor ability to save will also reflect visibly to your child.
Step 3: Set the example
Children of all ages are influenced by what they see. If you are in debt and constantly mismanaging your finances, none of the lessons that you try to teach your children will stick. If you want your frugal children, you have tos how a good example.
Do not spend your money wildly and recklessly, ensure that you set a good example for your children and you are almost certain to raise kids that understand the value and importance of money management.
Step 4: Offer rewards
After you have gotten your children to understand the concepts you are trying to instill, offer them the opportunity to use their savings to purchase something reasonably priced that they may have asked for or are interested in.
Allowing your child to spend a portion of their earnings will help them to further understand the point of having a savings account – the ability to spend sensibly on things that you may need or want without putting pressure on your finances. Help your children set a goal for themselves and once they have reached this goal allow them to experience the result of their saving; whether they would like a new toy or new clothes, or whether they choose to not spend any of their money and continue saving.
Financial skills for children are best taught at an early age because the earlier the teaching begins the more likely it will stick with your child. Encourage your children to save and manage their money wisely and when they get older they will thank you for instilling in them a necessary life skill.