Life Skills 101: Teaching Kids Money Management
It's never too soon to begin teaching your child "dollars and sense." According to experts, kids who learn how to handle their money early on are less likely to get in financial trouble later.
The risk is real, and it's closer than you think. Eighty-three percent of college students have at least one credit cardand an average debt of more than $2,000!according to a recent Nellie May survey. One of the most valuable lessons you can give your child is a basic understanding of money management.
Teaching kids about money doesn't have to be complicated. You can turn everyday activities into impromptu lessons. For example, at the store, talk about your purchasing decisions. When you go to the bank, explain the transaction you're making. Let your child help you push buttons at the ATM.
In addition, here are some other simple activities you can share:
- Practice making change together with pennies, dimes, and quarters. Kids love "playing store," so turn it into a game.
- Giving kids an allowance is a great way to teach hands-on money management. According to experts, parents should provide spending guidelines, but allow children to make their own decisionseven the poor ones. These make the most memorable lessons. And making small mistakes now sure beats making big one later!
- There are four components to money management: spending, saving, investing, and sharing. Giving your child a four-compartment bankor four separate containersis one way to get this point across.
- Suggest that your child donate a portion of her money to the charity of her choice. Talk about the good her money will do, and allow her to experience the satisfaction of giving.
- Take your child to the bank and open a savings account in his name. Teach him how to complete a deposit slip and keep track of his balance.
- Or, offer to pay "interest" on your child's savings at homesay, $.20 on the dollar. This will motivate your child to save, while teaching her how savings can accumulate.
- Invite your child to help you grocery shop. Give him a short list and teach him how to compare prices. Or let him be your coupon manager and tally up your savings.
- Play money-related board games appropriate to your child's age.
- Buy a few shares of stock in your child's name, choosing a child-friendly company she's familiar with. Together, you can track the stock's progress.
- Invite your child to "help" you pay bills by giving him a play checkbook and showing him how to write checks. Since kids love imitating mom and dad, this is a great way to teach kids about checking accounts.
Make your lessons supportive and fun. Experts recommend praising good choices rather than criticizing poor ones. Be patient and consistent, and your child will learn to be a good money manager.