When it comes to kids and money management there are plenty of different theories on what is the best way to educate your child so they become more responsible with their money now and in the future. Many parents struggle with explaining the value of money to their children, having to face that subject later in their children’s adult life. Teaching your kids early about the value of money and how to spend it can help your child later in life as they become adults and have to manage their own finances. Here are 3 points to consider when educating your child about money management:
1. The difference between a “Need” and a “Want”: “but Mom! i need that!!” How many times have your heard that sentence from your child’s mouth? Many children simply fail to understand the difference between needing something and wanting something. Granted, the child is not to blame for not understanding the difference. In a world where children compare themselves to their friends and surrounding environment, its very hard for your child to make that distinction. Make a point to explain to your child about life’s necessities and what fits your personal definition of a “Need” vs a “Want” (your personal definition might be different from your neighbours definition and its important you help your child define that).
2. Cover all aspects of money management - When teaching kids about money, remember to cover all aspects, including saving, bills, etc. Try and get your child more involved in the day to day money management activities of your household. Make it fun for them and get them to help you with simple actions like paying bills online, understanding your statements, etc. A great way to get your child involved is to open a bank account for them, start giving them allowance, and reward them financially for certain activities (good grades in school, helping you out on a house project). Kids lose interest quickly, thats why its important to make it fun and keep them involved and engaged. Take your child to the bank and let them deposit money using the ATM. Print out an activity report and go over it with them.
3. Understand the concept of Debt - Children are rarely exposed to the difference of debt vs credit. Its important to educate your child on understanding the impact of debt so that they have better tools to deal with it in their adult life. Try and make it fun by creating some sort of a game that will help them understand the concept of owing money and not being able to purchase something until that debt is erased. Once the child understands the concept of debt, you can start introducing them to the concept of credit.
Helping your child grasp these basic concepts of money management at an early age will sure to be helpful as your child grows to be an adult. Money management is an extremely important skill to teach your child and the earlier you do it the better.
For more information please contact Independent Financial Concepts Group today at 1-416-849-1653 or visit www.wecoveryou.ca