When I was young, my father was often out to sea leaving my mother in charge of the daily finances. I would see her sitting with her checkbook and bills, carefully managing the family budget. In my eyes it was my father who did the large, almost secretive investments. He would go upstairs to his computer and work through papers that contained very big numbers.
How to Teach Your Children about Money
What did I learn through this? First and foremost, that money was important, it was managed by both parents and the bills along with savings came before any fun spending. Yet, what was the first thing I did when I was on my own? Ignore my savings account and spend my money until it was gone.
In today’s world it is important to teach your children at a young age about bills, insurance, managing money and saving. You can begin teaching your child about money when they are as young as three. Start by explaining in simple terms about not getting every treat or every toy they take delight in. Explain you don’t have the money for that, but perhaps the both of you can add money to the piggy bank in order to go back for that item.
As your child gets older, begin an allowance plan. Make every Sunday “payday” and never let that day go by without your child receiving his or her allowance. Give enough money that your child will be able to save for toys or other items, but not so much that child always has money on hand.
When your children are in elementary school, open a savings account that does not require a minimum balance. Then increase allowance just enough to cover a savings account and a special charity. Add an extra chore when you do this. On payday, give your child the full amount but have him or her put some of the money into an envelope for charity and some for your next bank trip. Allow your child to choose a charity to give to and keep track of how much your child is earning in savings.
Your child should have set goals that must be met in order to receive allowance. You can even make a chart with expected (and agreed on) duties, such as washing dishes, making the beds or cleaning up after the dog. Do not take away money as punishment when the chores are all completed. Rather, use another tool you have on hand when your child needs direction.
As your child gets older, talk to him or her about how you pay the house payment, how you purchased the car and what insurance is and does. Explain deductibles – I will never forget my first unexpected one of those!
Once your child is in high school, let him or her sit with you as you pay bills. Show your paycheck amount and begin subtracting everything that is going out to creditors. This will be a huge eye- opener for any child and will help to build a solid foundation for later financial stability.