Despite the immense amount of time American students spend in school, few high schools or colleges teach financial intelligence. Since learning about money handling seldom occurs in school, parents have to teach their kids about money. Children have to learn where money comes from, how to save and how to set a budget.
Creating a Budget
One of the first things that children have to learn is how to create a budget and wait to purchase an item. Children can use a notebook to track their earnings and spending habits. To prioritize the toys they want to buy, this notebook can contain a wish list of toys or books that they want. By using the list, they can carefully consider which toy they want first and save money for it. If they do blow all of their allowance on a single item, then they will learn a vital lesson about overspending. Teach them how to keep track of their money by balancing a checkbook.
Avoid Impulse Buying
Instead of allowing kids to buy anything while they are at the store, parents should try to curb impulse buying. Parents can set the example by creating a budget before they go shopping and outline which stores they plan on going to. Together, parents and children can compare prices on the Internet and search for the best deal. Once children see the savings from planning and waiting for a purchase, they will be more inclined to turn it into a routine.
Instead of buying children anything they want, parents should encourage them to save their own allowance or earnings. Once they have a toy that they want, encourage the child to set a goal of saving enough money to buy it. She or he can track their savings along the way. When the time comes to purchase the toy, they can pay the cashier on their own. Learning how to save is important because recent studies show that the lower 50 percent of houses by income spend more on lottery tickets than they do on saving.
As children grow older, saving money will not be enough. They need to learn how to put their savings to use. Children can begin earning interest using a savings bond. Over time, parents can help children track how the money grows through interest. Some parents also provide separate allowances for saving and spending. This technique shows children that saving is important while removing the impetus of deciding the savings amount on their own.
Share the Riches
The last lesson children should learn is the ability to help others. Children should learn to donate a part of their allowance to charity. This teaches them how to help other people and think about people who are less fortunate.
Starting at an early age, children should start learning about money matters. Although young children need simple lessons like delayed gratification, financial lessons can increase over time.