Friday, March 17, 2017

Wealth Wisdom: 3 Creative Ways to Teach Your Child about Finances

One of the most important things you can do as a parent is teach your kids about money. It’s possible to teach children as young as three years old about the basics of saving or spending money. 

So why hasn’t every adult mastered basic finance management concepts? It’s because we, as a society, are not teaching them. 

Public educational offerings do not include lessons in proper money management, and children are left to educate themselves unless their parents can teach them what to do. So what should you do? 

Teach your kids some valuable lessons with these ideas.

The Value of Clichés

There are a number of timeworn phrases that describe some simple truths about money management. Instead of just repeating the phrase, why not get creative about teaching your children why they’re true? Here are some examples:

· “Money doesn’t grow on trees.” If money grew on trees we’d all have a lot more of it, and it’d be worth a lot less. 

However fruit does grow on trees, and that can help teach your kids the value of working for their money. Spend the morning picking fruit at a pick-your-own orchard. That afternoon they can sell their fruit at a roadside stand (lemonade optional). 

This also illustrates you have to spend money to make money, as they’ll have to pay for the fruit they picked before they can sell it.

· “If it seems too good to be true, it probably is.” Teach your child the importance of researching products and investment opportunities. 

It shouldn’t be difficult to find a spam email they can easily do a little research on and discover to be a scam.

· “A penny saved is a penny earned.” Teen children will grasp this lesson quickly by using the following method. Ask them to do the shopping (and maybe the cooking too) for all the meals on a given day. 

Give them a reasonable budget, and allow them to plan the meals and make the purchases. 

Explain that it’s important that they come in under budget. When the shopping is complete and the meals are finished, ask how much money was left. The money leftover is theirs to keep. 

It’s a lesson in frugality they’ll remember.

Clichés tend to stick around because they represent ideas that bear repeating and are still true today. You really do “get what you pay for.” Pass on that wisdom to the next generation.

The Value of Pretend

Children love to play pretend and mimic what they see adults doing. Take the opportunity to explain why you go to the bank, tell them about why you are choosing to buy one thing and not another, and when you pay the bills let them “pay bills” too. 

One of the easiest ways to introduce money into a child’s world is to create a “shop” where they can use real coins to buy real items from a pretend store. 

Set aside a low pantry shelf as their store, just be sure to supervise the game enough to hold them accountable. Nothing should go for free.

The Value of Stories

We often tell our children the story of the three little pigs, but what about applying that story to their piggy banks? Multiple piggy banks give a visual representation of progressing towards goals and budgeting funds. 

In the story of the three little pigs there is a house of straw, of stick, and of stone. A “straw” piggy bank would be money that is for spending on whims and candies—things easily blown away and gone. 

A “stick” piggy bank could represent saving for bigger purchases. The money is still spendable, but for things of value that will last a bit longer and cost a bit more. It is the way to save for a remote control robot, concert tickets, or a trip to space camp. 

The “brick” piggy bank is the security money saved for the sake of learning to save. This should be that largest of the three banks and children should be encouraged to put more of their incoming funds into this bank than the other two. 

It can help to discuss the money in the third pig as part of your child’s college fund, and point out that once they are through college they will need to continue saving like this for emergencies and for their retirement fund.

Teaching children how to save, how to earn, how to budget and how to share gives them a better understanding of the value of currency. 

Part of your job as a parent means preparing them to face the world, and life in the real world requires an understanding of money. There are plenty of resources available online to help you teach financial skills to different ages. 

Explain to your kids about credit cards and repaying credit card debt. Help them understand why and how you are budgeting your income. 

By sixth grade, most children have all the math and reading skills necessary to complete a tax return. 

Have you ever considered letting your kids do your taxes? It’s never too early to teach them skills that will help them succeed.

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