Teaching your Child the Value of Money
May 20, 2009
Many parents do not teach their children how to handle money. They will however teach their children values and ideals like honesty and fairplay. It is just as important to teach children the art of spending and saving money, because it is something that we need to do throughout our lives.
To ensure that our children have a secure financial future we need to teach them how to use money, make smart decisions regarding investments and spending. Below are some useful tips.
Be a good role model. He will learn his money habits by observing you and emulating your behavior. So teach by example. Save money and invest it.
Teach your children how to discriminate between wants and needs. This will teach them how to make wise choices and save as well. Teach your child how to set goals.
This will leave him in good stead throughout his life. When he gets a toy, inform him how much it costs, and also tell him that he will not get another for a few months.
Make saving a pleasurable exercise. Show them how to double their money. If possible, pay them interest on the money they save at home. This will make them enjoy saving more than spending.
For the child’s allowance, give him change instead of larger bills. Encourage him to save a portion of the allowance and pay him interest on it over a certain period of time. This way he can watch his money grow.
Open your child a bank account on his birthday. He will feel like an adult operating the bank account. Encourage him to deposit money in it. It will soon become a habit, and he will enjoy it.
This can also help him set goals. If he wants something expensive, he can save towards it in his account and then pay for his desired item. It may be a music system or Ipod. This will make his bank experience all the more pleasurable.
Make him keep a record of his transactions and also encourage him to maintain an account book. In a short while, he will start keeping a tally of his expenses and savings as a matter of habit.
Take your child grocery shopping. He will learn how to be frugal and how to spot good bargains. This will also teach him not to waste and to reuse leftovers.
Let him make his own spending choices. You are, at best, a guide. He will learn his lessons well if he is the one making the decisions. Once the child has learnt the value of money, teach him the dangers of borrowing.
This is the right time to teach him the concept of interest. If he has overspent and needs more allowance, tell him that it is a loan and charge a small amount of interest on it. He will learn quickly.
Invite him to participate in financial discussions that occur within the home. Involve him in the decision-making process with regard to investments and expenses. This will increase both his knowledge and his confidence.
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