It’s never too soon to start teaching kids about money. Whether they’re with you at the grocery store, watching you make purchases online, or starting to handle their own allowance and lunch money, children realize early on just how important money is to daily life. Teaching your kids about money in an intentional way can help you set them up for financial success later on. Here are a few best practices to consider.
Start with an Allowance
Think of allowance as your child’s introduction to financial independence. It’s a good way to learn about value, saving, and budgeting.
Consider whether you want to make your child’s allowance contingent on any chores. When determining the amount, think about how you hope your child will use the allowance. Do they have any potential expenses? Do you hope they save a portion of the money?
Finally, consider how you’ll pay the allowance. Some parents prefer to pay this on a predetermined day, like a paycheck. Others might create a more incentive based structure. Whatever you decide, be intentional about your choices and make sure your children understand the rules. This way, you can begin to have conversations about how allowance mirrors the real world, and what habits may help them succeed later on.
Help Them Set Financial Goals
Even adults have a difficult time prioritizing their future selves. For children, delayed gratification can be particularly difficult. Fortunately, an allowance can help you begin a conversation with your child about financial goals. Creating a clear goal can make saving money an easier concept to understand. For instance, if your child wants to buy a new toy, you might print a picture of the toy and put it next to a piggy bank. This way, your child knows that every time they save money, they’re actually one step closer to a new toy. Once your child has mastered tangible, short-term goals, consider creating longer term savings goals, like spending money on an upcoming vacation. Writing down these goals can help. Taking this approach early on can help your children master saving and budgeting later in life.
Let Them Practice
As children get older and more responsible, start to let them handle more of their finances themselves. You might let them know what expenses are associated with their summer soccer league for instance. You can also help them set up their own bank accounts, helping them broaden their exposure to money.
Since children younger than 18 cannot open bank accounts without an adult, this is a great opportunity to let your child handle their own finances… with training wheels. Walk your children through how they might automate their savings or handle online payments. Discuss bank fees with them and the different ways to pay.This can be an important step toward good, secure digital habits going forward. While the lessons you teach your children about money are personal and should reflect your values as a family, following these steps may help you create a framework for important conversations. You might even include your children in your next planning meeting with your Bogart Wealth Financial Advisor!
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