When I was a kid my parents never really talked about money. They did, however, teach us the value of a dollar in their own little ways. As an adult, when I finally realized just how tough things were in the 80s (both interest rates and debt were sky high), I remember asking my father why he didn’t share their struggles with us. He asked me if I would have understood the issue and all of its complexities as a kid. He makes a good point. I wouldn’t have.
It’s unfortunate, but children learn nothing about managing money in school. And the lesson society teaches them is to spend, spend, spend – all while racking up enormous amounts of debt. Who then is responsible for teaching the future generations about money? Whether you like it or not, you are. Here are some of the most important money lessons for kids.
Lesson 1: Money Doesn’t Grow On Trees.
Most parents offer their kids a weekly allowance in exchange for nothing. Sadly, that’s not realistic. I mean, how nice would it be if we got money for doing absolutely nothing? It’s okay to offer your children a base allowance, but teach them a valuable lesson by offering to pay them small sums of money in exchange for completing odd jobs around the house. They’ll soon the valuable lesson without you saying a word – the harder you work, the more you earn.
Lesson 2: Save, Save, Save
Kids can be demanding. There’s always something new that they want, but you can’t always afford it. Show them how to save money in order to acquire their wants. Offer to match their savings (or a percentage of their savings) until they’ve stowed away enough to buy the desired item. If anything, it’ll teach them about delayed gratification, curb impulse buying, and help them to make smart spending decisions.
Lesson 3: Budget Is Brilliant
It’s difficult for children to understand the concept of bills. They have no idea how much money you spend each month. When teaching them about budgeting, speak in terms they can understand. Take their weekly allowance, add that to the money they earn from odd jobs, and after setting some aside for savings, show them how much they have to spend each week. They’ll soon learn to budget for the things they want instead of spending it all in one place. If they do, don’t help them out. The best lessons come from mistakes made.
Lesson 4: The Difference Between Wants and Needs
When you’re a kid, everything is an absolute need – or so they believe. Teach your children the difference early on and they’ll have learned a very valuable lesson. Take them to the grocery store and ask them to tell you which items in the cart are needs and which ones are wants. This lesson will help curb impulse buying and the nasty habit of putting everything on credit.
Lesson 5: The Consequences of Credit
This is another tough lesson for kids – credit and debt – but one that is so important to learn early on. It ties in directly with needs and wants, as well. If you want to teach them in a way they can understand, offer them to pay for a “wanted item” with credit. Be sure to add interest and to show them how it works beforehand. They’ll soon learn that much of their allowance is going back to you, simply because they wanted something right away and couldn’t wait to save. It may be tough for you to watch your child hand over their money each week, but stick with it. It’s one of the most valuable lessons they’ll ever learn.
Lesson 6: Make Room For Mistakes
Some of the most valuable lessons I’ve learned haven’t been through books I’ve read or people I’ve talked to – they’ve been through mistakes made. It might be tough to watch your child struggling with money issues at such a young age, but think of it as the best lesson you can offer them. Trust me, they’ll thank you later.