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Many of us look at our children and wish that they understood our attempts to teach them about money management, from why we’re nagging them to turn the lights off to what that wasted food means for our grocery budget.
It’s all about the value of a dollar. We’d like our children to learn about what goes into earning money and how important it is to make good spending choices.
In order to help your children understand the value of money, you need to provide practical, hands-on lessons. This often means allowing your child to use money and to begin making decisions, even at a young age.
Here are some ideas for helping your child learn good money management habits:
Let your child earn money
One of the most important things you can do is let your child control some financial resources. Whether or not you pay your child to complete chores, it’s important for him or her to have some way to earn money. If your child isn’t paid for chores, an allowance should be set up or you should create a list of harder jobs for which he or she can be paid.
Another option is to let your child work for money in other ways. Kids in my neighborhood sell garden starts and offer yard-work services. Older children can babysit. My son is involved in 4-H and earns extra money by doing a good job on his projects and being paid ribbon money. Let your children see that they can work to earn money and show them that it takes planning and effort if they want to earn even more.
Require your child to pay for various obligations
Don’t just let your child spend all the money he or she earns. My son is required to set money aside for a savings account as well as to make certain charitable contributions. These are obligations that he must pay, and they reduce his disposable income. It makes sense to show your child that we all have obligations.
In order to help my son see that I, too, have obligations, I allow him to watch me pay bills whenever he wants (and he’s surprisingly interested in the process—probably because it involves a computer). I also show him the money I set aside in savings each month as well as what I donate to charity.
Allow your child to make mistakes
The most poignant lessons are taught through experience. Allow your child to make some mistakes with his or her money. My son, who is nine, learned a very valuable lesson when he asked to borrow money for something he wanted. I told him he had to pay interest and that he would have to repay the loan each week—after paying his other obligations of charitable giving and savings. At the end of the experience, he decided he didn’t want to borrow any more and that saving up was better.
My son has also made purchases he regretted. He was crestfallen when he realized how he had wasted his money. Making these mistakes now will hopefully encourage him to think critically about money in the future and prevent bigger mistakes down the road.
Encourage your child to set and reach achievable money goals
Show your child how important it is to plan for the future by helping him or her set achievable money goals. My son receives a small prize when he meets certain milestones with his savings account. We also focus on the sense of achievement and pride he feels when he successfully saves up for something.
In some cases, helping my son feel good about saving up money means that we meet him halfway. There are some things that it’s just not practical to expect children to buy on their own with meager earnings or allowance. In those cases, if it’s something we know he will really enjoy, we pay half and have my son earn the other half. The key is to set goals that are achievable so that your child feels a sense of accomplishment and understands that working toward goals is a worthwhile pursuit.
Take the time to teach your children about money management, and allow them to control their own budget. It will increase the probability that they will grow up to handle money more responsibly.
Miranda Marquit is a freelance writer and professional blogger specializing in personal finance, family finance and business topics. She writes for several online and offline publications. Miranda is the co-author of Community 101: How to Grow an Online Community, and the writer behind PlantingMoneySeeds.com.
The information contained in this blog post is designed to generally educate and inform visitors to the Equifax Finance Blog. The blog posts do not give, and should not be assumed to provide, personalized tax, investment, real estate, legal, retirement, credit, personal financial, or other professional advice. Before making any financial decision, you should always consult with the appropriate professionals who can explain your options, rights, and legal responsibilities, and advise you on any tax, legal, credit, or business implications that may result from those decisions. The views and opinions expressed by the authors of blog posts are their own views and may not be the views or opinions of Equifax, Inc. and/or its affiliates.
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