Kids and Money: Tips For Teaching the Basics
Dr. Dale V. Atkins, August 2009
How do children learn to manage money? There is usually no course at school, and many parents do not teach them about personal financial management. As adults, without a solid foundation, they are left to learn from their own successes and failures.
Additionally, today's children have more money to spend and develop financial habits at younger and younger ages. This results in many children who develop bad habits that can last a lifetime. It is important for children to learn patience, discipline, and money smarts that will guide them to be fiscally responsible.
Here are some tips to help encourage good financial habits:
• Give Them an Allowance - Having a regular amount of their own money is a good way for kids to learn about money management. As they learn about the limit of available funds, they need to be able to make mistakes. This teaches them to consider how much things costs and make spending choices. They are also more likely to appreciate what they buy when they use their own money.
• Be Clear on Expectations - Sit down with your children first and tell them, in an age appropriate way, what are your expectations for how they will use their allowance. It may be for charity, birthday presents for family or friends, toys, candy, entertainment, and specialty clothing items. Also discuss how much allowance should be put in savings for something they want that costs more than their regular allowance.
• Help Them Delay Gratification - Rather than spending their entire allowance on an impulsive purchase, consider setting a specified time frame before buying. You might suggest they wait for a few days and see if they are still as interested in that item.
• Differentiate Needs from Wants - Help kids understand that they are part of a larger world regarding the family finances. How and what the do affects the family. Talk about what you are saving for or how many work hours actually went into a large purchase you made so they understand the realities of satisfying every whim.
• Teach Teens About Debt - Discuss with your teen whether they want to build credit or create a lifestyle they can't afford. Many teens do not know that credit cards are a form of borrowing, as are loans, that incur interest charges. Explain the difference between credit and debit, how to balance an account, and that the ATM might not give an accurate balance.
The only way our children will learn to manage their money responsibly is through their own experience and the guidance you, as parents, grandparents, or friends may offer them. We all learn from trial and error and from role models. Create the time to set the foundation for positive financial management.