In today’s difficult economic situation, it is more important than ever for kids to grow up with good financial sense. Here are seven things that you can do to help your children understand the value of their money.
1. Give them an allowance.
Ideally, there should be some chores connected with it so that they learn from an early age that a steady income is connected with hard work. If they don’t do the agreed-upon work, they receive less money – or none.
2. Open a savings account for them.
Wait until they are old enough to understand, then accompany them to the bank so they can observe the process. Encourage them to put a portion of any money they receive in the savings account. Keeping separate piggy banks can make it easier to divide their money judiciously.
3. Don’t buy them whatever they want.
If you always give in to their demands, you will most likely end up with spoiled children who will continue to expect handouts from you as they get older. Make them understand that there is a difference between what they want and what they need. If it’s a want, it can wait until they can buy it themselves.
4. Discourage impulse spending.
Even if they have the cash on hand, if they’re shopping with you and grab something from the shelf, make them put it back. When you’re done shopping, ask if they want to go back and get it. If they still want to spend the money and trek across the store to retrieve it, then they can buy the item.
5. Urge them to get a job.
When they’re young, they can do odd jobs around the house and for friends and neighbors. Mowing lawns, babysitting and raking leaves are good ways for pre-teens to earn some extra money. Once they’re 16, they can apply for jobs in retail, fast food or other establishments.
6. Warn them about credit cards.
They will be prime targets by their late teens, so make sure they understand how quickly debt can add up. Remind them that if they don’t have the cash to buy something, they shouldn’t buy it.
7. Tell them your stories.
Finally, don’t be afraid to tell them about your own financial failures, as well as your successes. Hearing about your ups and downs will make important money lessons more relatable and memorable.
David Milberg is an investment banker from NYC.