As parents, we only want the best for our children. This means providing them with the tools that they need to succeed in life. However, many of us fail to properly equip our children with the tools they’ll need to successfully manage their personal finances.
All too often, parents wait until their children are teenagers before they begin discussing the importance of saving money, living on a budget, and investing. Although better late than never, it’s imperative that parents introduce their children to certain monetary concepts at an early age.
How Young is Too Young?
You may be amazed at how much a toddler can understand about money. They know that money is used to buy things at stores. Some toddlers even understand that mommy and daddy earn money at their jobs.
If they can understand this, then they can definitely start learning more about money and the importance of saving.
How to Get Started?
Getting started with teaching young children about money isn’t difficult. It’s as simple as establishing a few rules for savings and spending.
Before you can begin, you’ll need to explain to your child that sometimes they will have to wait to get something that they really want. This want creates an initial savings goal for your child.
Get your child three small piggy banks and label each jar with either “Savings,” “Spending,” and “Sharing.” Help your child create a simple budget of how they will account for any money they receive and how much they need to save to purchase what they want.
When your child gets money from an allowance or as a gift, help them stick to their budget and savings plan. Make it clear that any money set aside for spending can be used for smaller purchases, money saved for sharing is to be given to charity, and the money they’ve saved for themselves can be used to purchase their big item.
Incorporating Additional Lessons
As your child grows it’s important to introduce them to more advanced financial concepts. By the age of ten, children should understand that money is a limited resource and not every family has the same amount.
Young teenagers can begin learning about how money grows and important financial concepts, such as the Time Value of Money and compound interest.
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