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Money Management for Kids

Money Management for Kids: How to Grow Financially Educated Children

It’s important to start teaching your kids financial literacy from an early age so that they grow up financially educated. Thousands of people can’t manage their own personal finances because they weren’t taught how to handle money and deal with it when they were young. 

So, they end up having debt and thinking they are living a normal life. If you want a better future for your children, it’s time to take action. Carers and parents have a great influence on how kids manage their money in adult life. In this article, we are going to talk about the best money management methods for kids.

Teaching money  management for kids doesn't have to be hard!

Why You Should Teach Your Kids About Money

Some parents believe that children will eventually learn about dealing with money while they grow and develop. However, if you look back at yourself and be honest try to find the answer on what good and bad financial habits you can trace back to your childhood learning. Did your carers or parents teach you some money habits? The majority of adults today have little financial literacy and the school doesn’t give this knowledge either.

You can check financial guides from Fit My Money to educate kids and improve your own financial literacy. If you start teaching your own kids about personal finances they will be able to feel more confident and protected in the future.

They will be equipped with the necessary knowledge about spending, saving, investing their funds, and dealing with debt. You will teach them valuable lessons on how to handle money, be responsible with spending, and manage them effectively. Having such conversations will help your kids develop essential financial skills and avoid mistakes.

Top Money Management Tips to Teach Your Kids

You may suggest that parents might not give a decent example of how to handle personal finances especially if they have some debt. In fact, plenty of people lives from paycheck to paycheck today. However, you can actually show your children what they should or shouldn’t do in their lives based on what you’ve learned so far. Demonstrate that financial habits are essential as they help people manage their funds and learn how to set aside for a rainy day.

1.  Talk About Needs and Wants

Almost every child has multiple “wants” on a daily basis. As a parent, you should aim to teach them how to distinguish between their needs and wants. Try to give examples and explain to them the difference between necessities such as home, food, basic clothes, education, and healthcare, and extra things such as entertainment, designer clothes, or laptops.

You may even play a game pointing at various things around the house and thinking if they are needs or wants. This way, your kids will be able to learn that there are essential things and basic needs in life while other items may be additional. So, if your funds are limited you should first cover all the necessary expenses and then leave the rest for your wants.

2.      Set Goals for Saving

Another useful strategy is to establish saving targets. Some kids tend to save their allowance without a specific aim. So, they may end up spending these funds on something insignificant or just go on a spending spree. You should explain to your kids how to set particular goals and save for them. For instance, an envelope challenge is a great way to teach your children how to save.

The idea behind this envelope challenge is to have 100 empty envelopes with the numbers from 1 to 100 on them. You choose a random envelope every day and put the amount of money equivalent to the number written in the envelope so that it’s possible to save $5,000 in 100 days. 

You may also turn it into a fun game for your kids and give them 30 envelopes for a month encouraging them to put in as much as they can on a daily basis (at least $1 each day left after their lunch, etc.) so that they save a minimum of $30 at the end of the month and spend them as they wish.

3.  Give Them a Chance to Earn Some Money

Besides, you may teach your children the value of hard work. Give them a chance to earn some allowance or extra funds in exchange for doing household chores. This is a useful opportunity for your kids to learn how to earn money as well as save them. 

Just giving your children weekly or the monthly allowance may not be that effective as they take this money for granted. However, earning this money for hard work around the house will be much more valuable in their eyes so they will learn how to save as well.

4.  Teach Them Saving Rules

It’s important to teach your kids how to save their funds. Younger children may benefit from having a piggy bank but you may want to have a clear jar instead. It’s much better to have a visual idea of how their money is growing day by day. You may open a savings account for your older children and show them how to set saving goals and be consistent with your savings trying to set aside some cash on a regular basis.

According to Statista.com, almost half of children have a saving account and every tenth kid has a credit card. But do they really know how to manage it?

5.  Ask Kids to Track Their Costs

Finally, you should teach your children to track their spending. This is another essential part of learning how to handle personal finances. When they understand how much they spend and where the money goes they will be more accountable for their money. 

While adults may take advantage of online apps for tracking their expenses, you may ask your kids to write down everything they purchase or pay for during the month. Ask them if they are satisfied with the amount they spend or they may change spending habits to reach their saving aims faster.

In conclusion, parents and caregivers should take some time to teach their children financial literacy from a young age. Teach them the value of money and hard work, how to distinguish between needs and wants, give them financial responsibility, and set the right example so that they grow up confident and know how to manage their own funds.

Teaching money management for kids doesn't have to be hard!