It is never too early to learn about being able to manage your own funds. The same can be said of kids, which is likely why it became something of a practice for youngsters to be given an allowance. Money management for kids can be a tricky subject overall, though. Is it possible to teach kids the seemingly grown-up concept of being financially responsible?
The answer is a big yes. Kids actually begin forming money-related habits by the early age of 7 years old, according to a study from the University of Cambridge. Additionally, they're already paying some attention whenever their mom or dad makes a transaction. Getting your kids' financial education started is not actually as difficult as it seems.
Involvement and Movement
The best starting point for teaching kids about managing money is to deliberately get them involved. Let them observe when money is being exchanged, like when you're paying for pizza delivery. Guide them through calculating the exchange, too: For example, finding that $2 is the change due after paying $20 for an $18 bill.
Don't hesitate to ask questions, either. When you're preparing to buy something, whether it's a big or small purchase, see if you can get them to share an opinion on the expense.
Here are some of the best ways to effectively teach your kids about money:
- Kick things off with coins and a piggy bank. Young kids in particular will benefit from beginning with coins. Teach them the value each coin has, then get them a piggy bank and encourage them to save. Find a clear jar or a piggy bank that's somewhat transparent, so they can literally watch their savings grow.
- Show and tell. Since kids are very observant, you are the best example they have. Try your best to explain what is happening whenever you use your ATM card, write and/or deposit a check, or pay for something like coffee. Try your best not to make impulsive purchases around them. Instead, explain that you'll be thinking it over for a day or two to make sure that you really want to buy the item in question.
- Start their savings account. Do your best to simplify the concept of compound interest, then let them see how their money gradually grows when placed in savings. When they're ready, you can also get them a checking account if needed.
- Have an allowance system. Majority of Americans firmly believe in kids receiving allowance. According to a survey, 52% feel it should be earned through chores; 27% believe that it shouldn't just be earned; it can be gifted, too. Whichever path you take, giving kids an allowance also means they need to develop skills in basic budgeting as well as rationing.
- Make it fun. Play games that encourage learning about money. There are board games and online games that address this. If your child is into pretending they have a restaurant, you can even teach that way through the "bill" at the end of every meal.
Kids are incredibly observant, and with how the world is ever-changing, it can never be too early for them to learn about money management. It is also a great way for them to develop other life skills, such as goal-setting. If anything, the earlier, the better, since people usually start to develop lifelong habits at an early age.
Curious about effective money apps for kids? Download Kiddie Kredit, the mobile app designed to educate children on the credit system by completing chores!