This time I have thought of sharing with you some basic financial management strategies, which you should teach your kids at an young age. Kids learn and try to imitate what they see. So, while you are teaching the money management strategies, try to follow good money management techniques yourself. This way, your children will see and build the good money management habits, automatically.
Engage your kid’s interest in money and saving
The best way to engage your kid’s interest in money is to give an amount and asking him/her to save a portion of it at a piggy bank and spend the rest. It is advisable to not interfere in the decision of how he/she wants to spend the amount. This will make your child responsible to handle money. Also take your child to a bank and involve him/her to open a savings account. Explain the purpose of opening such an account and every time, the statement arrives, ask him/her to open the envelope and make him understand why and how the balance grows.
Make your child learn to organize documents properly
Whenever the financial statements arrive from the bank, make your child go through the statement and understand how the balance grows. After reading, he/she should keep the monthly statements in a binder or a folder. This will help your child learn to be organized and keep financial documents properly.
Reinforce your teaching from time to time
Whenever you get the opportunity to save your hard-earned dollars, make sure you involve your kids in such transactions. For example, suppose you’ve got a discount by using a coupon while buying online, explain to your children how they can also organize the coupons and use them to save money.
Encourage your kids to practice budgeting
When you allocate an amount to your kids, ask them to separate the dollars in 3 categories – saving, spending and giving to charity. This way, they’ll learn how to allocate their allowance and they’ll also learn to save more if they want to buy an item of their choice. Also involve your kids when you’re planning your family’s monthly budget.
Make your children earn money
Ask your children to do simple household chores and pay them when they successfully complete the work. Consider giving them additional bonus when they complete the task before the stipulated time period and do some additional work. Similarly, there should also be penalties for unwanted behavior. For example, if your child keeps the toys scattered in the room while going to sleep at night, then about twenty five to fifty cents should be deducted from his/her allowance. This will help them build good habits which will stay lifelong.
Introduce the concept of comparison shopping
Children can learn comparison shopping from the grocery store. Whenever you go for weekly grocery shopping, take your kids and ask them to pick up their favorite ice-cream, which offers more quantity in less price. They’ll learn the difference of buying store-brand ice-cream over gourmet ice-cream. However, when you make the final decision, explain to them why you’ve chosen a particular item. It should not be that they’re choosing only the less-priced item. They should learn how to make the wise decision of choosing value for money.
Every one of us learn from mistakes. So, it is quite possible that you’ve also made some financial mistakes. But, that doesn’t mean that you can’t manage your money properly. So, you can explain the money mistakes, you’ve done, to your children, so that they don’t repeat them in their life. In fact, these mistakes can guide them to become better financially responsible people, when they grow up.