Every year, American children receive over $15 billion in allowance, gifts and wages — reason enough to start teaching them money management and consumer skills at a young age. The following tips can make the difference between a child who grows up to be financially secure and one who doesn’t.
Teach by Example
The best way to instill good financial habits is by “walking the talk.” For instance, when you go shopping, include your kids in the process — planning, budgeting and comparing prices and quality. If they urge you to buy something that is over budget, explain that spending more on the item you’re purchasing today is not as important as saving up for something else you need or want in the future.
Live Within Your Means
Children who learn to prioritize their spending learn the most valuable money management lesson: to live within their means. Reinforce the message by not jumping for the credit cards or giving extra money just because your children ask. When kids want an expensive “status” item, like hundred-dollar athletic shoes, consider having them pay the portion of the price that exceeds what you think is reasonable. They’ll appreciate the item more and may think twice about paying that much when they outgrow this pair in six months. If you choose, go ahead and lend money, but treat it like a loan. Charge reasonable interest and set a time frame for repayment. It will teach them how loans and credit in the real world truly work.
Encourage Savings
For your sake and theirs, encourage your children to make saving a fixed category in their spending plan. TFCU’s SaveAbles Kids Club, for children under 18 (geared to age 13 and younger), is designed to teach them about money and saving, while encouraging them.
Discuss goals and calculate how much should be put away each month. Break down savings into long-term, for college or a car, and short-term, for a new toy, video game or bike.
It’s never too early (or too late) to develop healthy financial habits. The rewards of wise money management are the same for adults and children alike — a greater appreciation of what you have, a sense of empowerment when you reach your goals, and long-term financial security.