April is financial literacy month and we are going to show you how to help your child manage money. Many of you weren’t taught how to manage money by your parents or at school, and yet it’s a skill that can be life-changing. Helping your children to be financially literate can start at a young age and will enable them to understand how to work with money, how to save and what investing money can mean.
Pay for Jobs Well Done
While you want to instill the idea that some chores are just part of being in a family, and you certainly don’t want to have to pay for every little task you ask your kids to do, creating a framework whereby they earn money when they do a job well is the first step in gaining financial independence.
In order to learn to manage money, they must make money first and you should only pay for quality work. You will need to find a balance that works well for your family here.
Save, Spend, Give
Money that is earned or received as a gift should be divided into three lots. One is for saving, one for spending on themselves and one for giving. Giving can be money that is donated to charity or is spent on gifts for friends and family, or for birthday and holiday celebrations.
One way to teach them the value of money is to ask them to plan family finances. Start small with a single meal; give them a budget and ask them to make a plan for a special meal like a birthday celebration or Christmas dinner.
Guide them here and help them to plan, make lists and shop for the family. These exercises can be expanded as their knowledge and capabilities grow. The more they learn about family finances and planning, the more understanding they will be about the cost of things which may negate the need for you to explain why they can’t have a new phone/computer/games/shoes etc.
While they will get some sense of this with their savings, you can reinforce the idea by matching a percentage of their savings for larger items. Let’s take that new phone they want; instead of buying it for them, offer to match a percentage of the money they save towards it. This is especially effective with bigger items like cars, but start small to reinforce the idea that savings may take a long time, but are worth the joy of the final reward.
Allowing your child to make financial mistakes is part of the learning curve. Making poor choices and then learning from their mistakes will be a really valuable lesson for them.