How To Teach Your Children About Money

All parents wants their children to be happy and successful. Teaching children about money from a young age is one way to ensure their financial success in later life. Even very young children can be taught about money, by words and actions.

1. Realize that your children will imitate you. This is a case of needing to practice what you preach! To some extent, it doesn't matter what you say if your actions do not match. If you are talking to your kids about saving money, save money yourself instead of making impulse buys. You're investing in the next generation.
2. Start allowances young. Very young children can get a small allowance, which increases as they get older and more responsible. As they handle money and begin learning what it can buy, they will understand the value of money.
3. Set goals with your children. Although it is hard for a child to put off buying a toy or some candy, help your child understand what he or she can buy with allowance saved for one week, two weeks, three weeks, or a month.
4. Help your children save money. While your children are still young, open a savings account for them. Explain how interest basically works so that they have an incentive to save money. Better yet, offer to match funds - if your child deposits $7, you agree to deposit another $7.
5. Budget together. Although you may not want to get the spreadsheets out, you can help even your young children write down how much they spend on a toy or a candy bar in a notebook. This way, they will learn to keep track of their money. Older children and teenagers can be given a larger allowance with more responsibilities such as buying toiletries and paying for bus fare, after working out a budget along with you.
6. Teach the difference between needs and wants. This is hard for all of us! Talk about what real "needs" are as opposed to "wants." Explain that a "want" isn't something you can't get, but it might be something that you don't need right away, or that you save up for. Again, try to practice what you preach!
7. Explain interest on loans. When your child is old enough, explain how interest is calculated on loans. Offer to loan your child some money, but make sure that he or she pays it back with interest! This should be enough to turn them off of credit card loans!
8. Let your child make occasional bad decisions. We've all had to learn from our mistakes, and your children probably do too. Buying something for your child when he is disappointed because he's already spent his allowance will not help him learn nearly as much as experiencing the disappointment. It's hard to watch when our children are disappointed, but sometimes it really is the best thing for them.
9. Explain advertising. Again, this is a concept that many adults have problems with as well. Explain how advertisers use tricks to make things look better than they really are, or how they convince us that we really need something when we don't.
10. Teach your teenagers how to use credit cards responsibly. Credit cards can be great, but people need to be taught how to use them responsibly. Make sure that your child knows before he or she goes off to college!

It might seem overwhelming to teach your children how to use money, but it will pay off for years to come! Children learn quickly and are more influenced by their parents than they like to admit. Teaching children how to be responsible with money will ensure that the next generation is not bogged down in debt.