One of the responsibilities of parents is the early financial education of their child. Teaching kids about money isn't easy, but with enough time and patience, you'll see it pay off. Children must learn about money while they're young—things they learn early will stay with them and help them through their teenage years and adulthood. The earlier to start, the more likely the lessons will remain with your kid—here are practices you can introduce today.
Keeping an Allowance
Let your child experience having an allowance as early as possible. Having it is one of their first lessons on keeping an income. It teaches many lessons about sources of money, how people obtain it, and what they can do with it. When you give your child their allowance, teach them how to count the bills and coins. Also, show them how to keep their money safe. If a child has a wallet, it will encourage him to develop a sense of responsibility.
When you give your child an allowance, encourage or require him to save a percentage. For a younger child, it's enough to have him set aside some of the cash in a box or an envelope. School-age children can put their savings in a bank account. Letting them practice saving teaches fiscal responsibility, which is essential no matter how old you are.
Children should understand budgeting and how to keep a budget. Include your kids in family discussions on finances and let them see how a budget works in daily life. For example, if the household has used up its entertainment budget for the month, sit your kid down and explain why you will stay in and play board games instead of buying a new toy.
Understanding how money works and why budgeting is necessary is an important lesson for children. Also, when they can participate in setting the budget, it makes them feel like their opinion is valuable, which reinforces positive feelings and behaviors related to budgets.
Keeping a Financial Journal
Writing down figures and keeping track of spending make the previous lessons concrete. Keeping a journal lets children see the value of tracking their money and knowing how each purchase costs. When they start saving for a large purchase, they will find it easier to reach their goals, especially if they've formed this habit beforehand.
Giving to Charitable Organizations
Besides allocating a portion of their money for savings, money education also involves encouraging your child to give a portion of their allowance to charity. While they must learn about earning money, they also learn about giving. Charitable contributions teach them that they are part of a larger community and that their resources can help others in greater need.
Investing in Stocks
Parents can open custodial accounts for their children. If you open an account for them, you can teach them the fundamentals of researching stocks, investing money, and tracking their stocks' performance. Choose stocks that relate to their daily life, like Nike, Coca-Cola, or McDonald's. Investing will help them have a growth mindset about money and appreciate people's relationships to things, businesses, and communities.
Getting a Job
The best way to teach a child about money is to let them experience earning it. Help your high school-age kid find a part-time job—walk them through the application process, give them tips for the interview, and congratulate them when they get a job. Getting employed in high school will help them apply for higher education or full-time work; it shows professionalism and initiative, traits that colleges and companies value.
It falls on parents to model financial responsibility to their children. If kids learn how to budget, invest money, and do related activities early, they'll have the skills they need to make good life decisions when they are older.
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