How to Raise Financially Smart Children

Waiting for the perfect time to teach your child about money? The truth is, there is no perfect time. The earlier you start, the sooner they learn the importance of saving as well as handling money.

Difficulty: Moderately Easy

Instructions

1. Talk About Money- This in no way means discussing your salary. Keep this information as it should be...a secret. Take time to explain what minimum wage means then show them your grocery bill. Allow them to figure out how many hours someone making minimum wage would have to work to pay the family grocery bill.
   Bring up current events concerning money and explain what is going on in the word. A persons spending habits generally reflects what they understand about the financial world.

2. Involve- Children learn spending before saving. It's just natural because they constantly witness you paying for purchases. By involving them in the bill paying process you will begin to teach them allocation and the importance of needs verses wants.

3. The Piggy Bank- Young children can be given a small allowance for chipping in around the house. i.e. putting away their toys. Young children can be paid weekly, whereas older children can be paid biweekly or even monthly. The idea is to teach them to manage money over a longer period of time.

4. Savings verses Spending- Allow your child to use a portion of their allowance toward something they want. The other half should be put in a savings account. Let your child keep track with their own bank book.

Tips & Warnings

• Take advantage of the benefits of teaching children about money when they are young. These lessons are not taught in school.
• Change the expectations not the rules as your child gets older. Add more appropriate chores. Decide on a fair savings/spending ratio.
• At the right age encourage your child to get a job and earn their own money. Help explain taxes and the importance of a credit rating.

Resources

• Chore Chart
• The Financially Intelligent Parent (Book)

[crosswised]

on 11/29/2009 This is so important for preparing children for the day they are living on their own. Great article and great advice! Rated 5*

[ljbinkop]

on 4/21/2009 I loved his article on raising financially smart children! Thank you! I try to do this every day...

[carby]

on 4/6/2009 My parents did this, and it is such a good idea. 5*

[Smireles]

on 3/9/2009 Excellent suggestions. Good job!