Parents care deeply about their children and want them to succeed. Unfortunately, far too many parents do not think about some of the most basic lessons that they must pass on to their children in order for this to happen. One of the things worth fretting about is teaching your child about money management. This is not something that they are going to learn about in the school system, so you have to teach it at home. Today, we have four tips for how you can make this process easier.
1- Teach Them About Opportunity Costs
Someone who has a child who is a teenager or close to that age ought to work with that kid to teach them things about their opportunity cost. Put another way, a child who has reached the age of roughly twelve or thirteen should be able to understand that spending money on something they like might preclude them from spending it on something else that they like.
DaveRamsey.com says explaining to a child of this age what opportunity costs are in a way that they can relate to is a great idea. For example, if they want to purchase a video game, they may be able to do so. However, if doing so means they cannot purchase some clothes that they also want, then was the video game really worth it to them in the first place? Those are the kind of lessons that should be taught at this age.
2- Allow Them To Earn Small Amounts Of Money Early On
Some parents believe that children should not be paid for chores because it is their duty to do those chores as part of the family. That is a fair way of thinking about things. At the same time, other parents believe that giving the child a little bit of money for doing a little extra could help that child to start building an idea about what the value of a dollar is.
While it is okay to be a fan of either approach, letting your child learn the value of a dollar may be a more valuable lesson for them to take away from the experience. They can start to appreciate more about what it means to receive an income, and that may also help them learn how to budget it better says mymoneycoach.co.
3- Set A Good Example By Practicing What You Preach
It is always best to practice the lessons you preach to your children. Many of us take this for granted when it comes to something like teaching them our religious or moral values. However, do we always think about it when it comes to money? Probably not.
How is a child supposed to learn about proper money management if their mother and father and always out spending up all of their money on credit cards? It is probably not going to happen. Instead, the parents have to set a good example for the children. Highlight to them times when you forego something you would like to buy right now because it is not in your budget. You might even break out your budget and show it to them if you believe that they are mature enough to understand it to some extent. Whatever you do, make sure you are at least pushing towards the right direction. You might just help instill lessons in them that stick with them for a lifetime.
4- Talk To Them About Investing
Investing is the best thing that a person can do for themselves towards building a brighter future. However, very few of us do this like we should be doing it. We may not even understand investing well enough to feel that we can articulate it to our children. That can be a real problem. There are books out there that are age appropriate for children to read about investing. At least by using some of those you are pushing them in the right direction. This may help them best understand what you really mean when you explain certain investing terms to them.
Some children will naturally gravitate towards these types of lessons, but others do not. Make sure you are patient with your child and try to help them to understand that these lessons are really for their own good.