How to Teach Kids Financial Skills
According to CNN Money, the earlier you teach kids about money, the better, as kids often as young as 4 and 5 often start asking questions about where money comes from. From understanding why they can't get every toy at the department store to learning how to make their allowances grow through investment to knowing how to use credit cards and checking accounts wisely in college, teaching kids financial skills helps them build positive habits at each age.
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Instructions
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Talk to your children about your money decisions and allow them to "help" with financial activities such as paying bills and going to the bank. Naturally curious children will be interested in what you are doing, and you can use the opportunity to teach then about where money comes from and how it is used. Show them how to do tasks such as balancing checkbooks and filling out deposit slips. According to LendingTree.com Chief Financial Officer Edward Powell, letting your kids see you act responsibly with money by budgeting and spending smart helps them learn the importance of the skills.
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Give your kids an allowance and help them budget, save and invest it. Have your child earn through chores and behavior, and talk to him about how he would like to use the allowance. Have discussions about needs vs. wants and how to decide what to save for. You might even have them contribute a certain percentage that you match to buying bonds and mutual funds. When children have an unexpected expense, such as a sports uniform or repair for something they broke, have them take out of their allowance to pay for it. This will teach them the value of caring for their possessions as well as the importance of sacrificing some wants to have money for unexpected needs.
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Teach kids financial terms and strategies using interactive websites. Like all constructive lessons, financial lessons for kids need to have both classroom and practical components. Kids need to learn about smart money concepts as well as practice how to use them. Interactive financial skills websites such as the U.S. Mint's site and WhatsMyScore.com's financial football game teach kids financial strategies and terms they can use when managing their allowances.
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Use money as an incentive to teach other skills related to finance, such as negotiation and entrepreneurship. If your child asks you for money to go to a special camp or event, help her come up with ideas to make that money herself. If you are thinking of raising your child's allowance, ask her to put together a formal proposal, and then negotiate her "salary" with her the way a real boss would do.
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Tips & Warnings
If your child does not seem to be interested in money matters, start with things that interest him, such as sports or art. Connect money management to these subjects. For example, have him pretend to be the fianancial manager for a sports team or save money to buy new art supplies.
Your money habits will rub off on your child, so if you are a poor manager of money, take a financial planning course before you teach your child.
References
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