How You Can Teach Your Children to Be Smart With Money

Most children today study the basics of money in grammar school, but really do not know how to manage it unless a finance career is chosen in their future. Therefore, it is up to adults to teach children about money and finances before they reach adulthood.

Teaching a child early has it benefits both short and long term. Habits of saving as well as making smart purchases, understanding the meaning of ‘investment’ and knowing why you may not be able to get everything right when you want it will all help in short term. Avoiding accumulating debt, saving for the future and financial security will help in the long term. Most experts will agree that the earlier the better you teach children about money. By teaching strong financial practices and habits early, children build a solid foundation they can carry throughout their lives.

Those children who are not taught proper money knowledge, skills and management usually grow up irresponsible with it. It is parent’s responsibility to instill a type of respect for money management and how it affects our lives. Without this knowledge, a child may grow up being incompetent with financial matters. It is good to know that is can be prevented by instilling insights into children at a young age and continuously through childhood.

How to help a child be smart with money

1. Begin talking to a child at a young age about money. As soon as he or she can count, they can start to learn about money. Allow them to sit in on an occasional family discussion about money so that they can start to have an increased understanding.
2. Discuss all details of money to kids. It is important to discuss the value of money, where it originated, why we use it, its uses and how it affects us and our lives.
3. Give a child his or her own money. Show him or her exactly what can be bought with the amount of money you provide them. Show them how they can save money and what happens when you continue to save.
4. Teach interest. Teach a child how interest accrues when money is saved and explain what can be bought with the money after being saved or accruing interest for a period of time.
5. Put a child on a schedule with money. Allow a child to keep money for a period of time until it runs out. Show that if it is spent too fast, you will run out and how you have to wait until another payday to get any more.
6. Discuss or show a child some sort of poverty. Make sure a child understands what it is like to not have enough and have to go without.

Often times, giving a child allowance provides him or her a first experience with financial freedom. With some money in hand, a child can learn to begin to save as well as budget. Opening a savings account for a child is another easy way to introduce the idea of saving money. A child will learn how a savings works and enjoy going to the bank while being in charge of his or her own money. There are many banks that offer incentives and activities that are designed to help a child learn the basics of finances.

Commercials and peer pressure constantly temp children to spend money. A child needs guidance to learn how to make good decisions when it comes to these. Teach a child how to set aside money for shopping trips in the future. This encourages savings for something he or she wants instead of buying on impulse. It is also important to let a child make mistakes. Show him or her the basics and let them try to make good decisions. Lessons can always be learned from making mistakes. Try not to expect a child to have long-term goals. Younger children tend to lose interest in something that many take longer than just a week or two. And if a child is not able to reach a particular goal, put it aside as an experience. Over time, a child will learn to become a disciplined saver.