Learning good saving and spending habits should start when your child is young. Money is an essential part of society and learning how to manage it is an important skill to obtain. I have interacted with some people who are scared and uncertain when it comes to their own personal finance. I want my children to develop a healthy relationship with their money before it is a necessity in their lives. Below I list some simple ways to help relieve fears when it comes to money and help children learn how to appreciate and save their money.
1. Decide in advance what to do with your wages
One simple concept about money is that when you work, you receive a benefit. Usually this benefit comes in the form of a paycheck, which is a person’s wage. With this paycheck people are expected to do the following such as pay their rent/mortgage, utilities, and insurance. They should also set aside money for savings, spending, and investing.
For kids, encourage them to do chores around the house by issuing a small allowance. I suggest a small allowance because for certain jobs done around the house when they go above and beyond. Working around the house should be a normal requirement and not an action that has to rewarded with money.
2. Remember to pay yourself
After your bills are paid, have a set amount that you are willing to put aside for a rainy day or put in the bank for your emergency fund. Emergencies happen so this fund will help you prepare for the unknown.
Encourage your children to put some of the money he or she receives into a piggy bank or real banking establishment.
3. Develop monetary goals
Goals are set to make it clear to yourself that you are striving towards something. You want monetary goals no matter how big or small because you want your mind to think about how much you need to earn in order to achieve your goal.
At first, money is an abstract idea for children. However by developing a goal it will help money become a more tangible and valuable idea. For instance, if your daughter wants a new Leapster game. Placing money in her “goal” bank will help her keep track of how money adds up over time. From time-to-time you should help her count out her savings and see she how much the money has grown. You can also help your her understand how much more money is needed to buy what she wants. When she has accumulated enough money to take her cash out and buy the game, then she will realize how money is no longer an abstract idea but has value and can be used to purchase goods.
I like the way the family in this video teaches their kids finance
Seven Ideas for Handling Finances Better