Unfortunately, many kids who grow up without learning how to budget, pay bills, or save money will grow up to become young adults who go deeply into debt. Teach your child about money from an early age, and you'll set him up for success later in life.
Allow Your Child to Earn Money
One of the best ways to help kids start learning about money is to let them earn an allowance. Just like most adults go to work to earn their money, children need to connect money with work.
Assign your child age-appropriate chores. Give out a weekly allowance based on your child's completed work. For young children, a few dollars a week for simple chores is appropriate.
Let an older child earn more money, based on a dollar amount you can afford. For some families, $10 a week is plenty.
Don't hand over money if your child doesn't do his chores. Even if that means he won't have enough money to go to the movies with his friends, don't give him a loan and don't offer him an advance on his allowance. The point is to teach him how to become a responsible adult and it's unlikely his future boss will hand over an advance on his paycheck.
Let Your Child Spend His Money
Your child won't be motivated to earn an allowance if you buy everything he wants, so it's important to let him buy some of his own items. For example, if your child wants a new video game, don’t just rush out to buy it. Instead, allow him to purchase it with his own hard-earned money and he’ll appreciate it a lot more.
Or, if you have a teenager who wants to go to the dance on Friday night, don’t just automatically hand over the money. Instead, make your teenager pay for extra privileges and activities. Let your child make some tough decisions - such as whether to spend money eating out with his friends on Friday or going to the movies with them on Saturday.
Help Your Child Save Money
Help your child set aside a certain percentage of his earnings into a long-term savings account. Make a rule that says 10 to 30 percent of your child's allowance must be tucked away each week.
For young children, separate piggy banks can be a good way to help them divide up their money into saving and spending categories. Help your child divide up the money each week and talk about why it's important to save money.
Set up a bank account for an older child. Start teaching your child how to deposit and withdraw money. Talk about how interest works and how banks can help you save money.
Develop a Budget with Your Child
Help your child establish short-term financial goals. Identify something your child would like to purchase - like a new toy or a new article of clothing. Then, discuss how much money should be set aside each week to save up for that item.
It can be helpful to show kids how long it takes to earn things. If your child earns $10 a week, discuss how long it will take to buy that new skateboard. Take the opportunity to talk about purchasing options and how to make choices about how much to spend on certain items.
Determine what financial values you want to teach your child.
For many parents, it is important to teach children how to give. Consider encouraging your child to set aside a certain amount of money that will be donated to church, a charity, or to buy gifts for others.
Provide Consequences When Necessary
Provide positive and negative consequences for your child’s money management. For example, provide lots of praise and positive reinforcement when your child works hard to stick to a budget. Don’t let his self-discipline go unnoticed.
Make sure there are negative consequences for mistakes as well. Sometimes it makes sense to allow kids to experience natural consequences.
If your child takes $30 with him to the mall and he spends it all within the first few minutes, don’t give him more money. Instead, let him feel bored the rest of the time you're shopping.
At other times, it makes sense to take away privileges as a consequence. If you have a child who disobeys, lies, or steals about his spending habits, establish a more serious consequence. For example, don’t allow him to go places with friends or take away his electronics.