As we get older, life experience grants us wisdom and knowledge that we only wish to have acquired when we were younger. Parents especially feel this way when they think about their finances and how this may affect their children. Even when they are young, children become very perceptive of the fact that money has value. However, it requires a lot of proactive parenting in order to guide children to understand how to manage money and work toward becoming financially independent as they age. Since we are now entering the back-to-school season, the following post will educate parents on how to better instill upon their children values that will help them manage their money and finances throughout their lives.
Tips for Younger Children
Money Has to Be Earned
Often, a child’s first perception regarding money is that it is used to obtain the things that they want. They may witness financial exchanges between their parents and cashiers at the grocery store, or they may perceive that their parents always have an abundant supply of funds at all times. Help your younger children understand that money has to be earned, and that it is not available in an abundant supply. When your children are entering their early-elementary years, set up a system of chores that will allow them to earn an allowance. This allowance can be as minimal as a dollar a week or five dollars every two weeks. When children understand that they have to work to earn their money, they will become less dependent on their parents for free monetary handouts, especially later in life.
Handle Money with Caution
One thing that younger children can struggle with when they receive money is losing it even before they have a chance to spend it. Make sure that your child has a wallet, a lockbox, or even a cliché piggy bank in his or her bedroom in order to store money. When your child has tangible money, make sure that he knows that the bills and change are his personal responsibility and that you will not be able to replace it if it’s lost. If your child starts saving, teach the importance of only carrying the amount of money needed for specific occasions. Also, encourage your child to count his or her money. This way, your child will always have an idea of how much funding he or she has readily available to spend or save.
Watch Your Savings Grow
Because younger children are very concrete, it is important for them to understand the importance of literally watching their savings grow. Over time, a piggy bank becomes heavier and produces a much more substantial jingle when shaken. Similarly, accumulated bills make a wallet thicker and denser. Some parenting experts even recommend giving children a clear container in which they can store their money. When looking through a clear container, children can see how quickly their coins and bills can add up over time.
Tips for Adolescents
Seek Opportunities to Earn Cash
When children reach adolescence, they become much more capable of seeking autonomous opportunities for earning extra income in addition to an allowance. At this age, children can become babysitters, complete yard work, and even assume part-time jobs on the weekends or after school. When children begin working on their own, parents will need to teach them to understand the difference between being paid in cash and receiving a paycheck. Paychecks are the perfect opportunity for parents to initiate conversations about taxes and how they affect the final number represented on a paycheck.
Don’t Make Comparisons to Others
In early adolescent years, children become much more perceptive of themselves and those surrounding them. Teach your child to be happy with what he or she does have and not to be jealous or judgmental of others who have more or less. Help your child to understand that self-satisfaction should not be measured in wealth and tangible possessions. Instead, teach your child to embrace experiences, relationships, and personal pride in order to ensure his or her lifelong happiness.
Open a Bank Account
Whether your child has significant savings in cash or starts to receive cashable paychecks, it’s probably time for him or her to open a bank account. When a child receives a bank account, he or she will require assistance in monitoring the account, writing checks, and understanding how to make payments with a debit card. If you have been raising your child all along to be financially responsible, he or she should embrace opening a bank account as a logical next step toward financial independence.
Of course, as your child ages, you will continue to provide ongoing financial coaching and assistance. However, it is important that you instill in your child values that foster financial responsibility. If you raise your child to depend on you for monetary handouts, he or she will struggle to find value in having a job or building savings. BMG Money understands that many of its customers are parents who wish to pass judicious financial values onto their children. As such, we are happy to help you with any financial decisions, including organizing your finances or applying for a loan.