When I was young, I often wondered why we can get food and toys with notes and coins. A child’s mind is filled with curiosity and hence, it is the best time to start teaching them about money. So, what are you waiting for? Getgo Parents shows you how to get the ball rolling!

Make Known That There is No Free Lunch in the World

At about age 5 when you expect your children to start putting away their own toys, it is a good time for you to start giving them allowance. When they accomplish the tasks you set out for them, give them a certain amount of money – which they can choose to save or spend. This will teach them about having to work for what they want and not think that they will be given what they want by pouting and throwing tantrums.

Let Them Make Spending Mistakes

During family outings to the supermarket or toy store, let your children bring along the money that they have earned and spend it however they like (with valid reasons). This way, they can learn about money management skills and also learn that they cannot buy everything they want.

So if your child wants to buy something, ask him to get it with his own money. If he ends up regretting the purchase, it will teach him to give more thoughts before spending money and not to buy on impulse the next time. I feel that it is a lot more beneficial for children to make a $3 mistake now, which will hopefully prevent a $3000 mistake somewhere down the road.

Talk About Deals

For example, when you are getting staples for your family, you can bring your child along and explain why you choose a certain brand over the others – maybe the brand is cheaper but of the same quality as the rest. By teaching your child about such deals, he will learn how to make better financial decisions and manage their money well in the future.

Teach Them to Save Before They Spend

When I was young, I was given allowance and taught to save whatever that I did not spend – the typical save-after-spending method. A better method would be to teach children to save before they spend. For example, if you give them an allowance of $1.20, make them put 20c into their piggy bank before allowing them to take the remaining $1 to spend. This will ensure that they will have savings and at the same time teach them the importance of saving before spending.

Tie a “No” Today to a “Yes” Tomorrow

In other words, teach your child about delayed gratification. When your child insists on getting a certain toy, you will definitely feel that you should satisfy his want. However, this would be detrimental in the long run. Instead, you should say no and go on to explain that this small amount of money can be saved up for a family vacation in a few months’ time, where he will have even more fun there. This way, he will learn that in life, there are things that he has to give up now to enjoy better things in the future.

Teach Them About Budget

One way to do so would be to give them daily allowance instead of weekly and monthly ones. This limits the amount they can spend each day. For weekly/monthly allowances, there is a high possibility that they will run out of money nearing the end of the week/month as they will tend to spend more than they can in the first few days. Thus, through giving them daily allowance, they will learn the concept of budget and spend within their means.

Teaching your kids about money requires patience, but it will be worth it when you see them with better money management in the future. Wait no further, start teaching your kids about money today!

Sources:
http://www.canadianliving.com/life/money/the_dos_and_donts_of_teaching_your_kids_about_money_2.php
http://www.forbes.com/sites/laurashin/2013/10/15/the-5-most-important-money-lessons-to-teach-your-kids/2/