Teaching your kids about making money can be one of the best things you ever do for your children while they are young. A child who understands money will make solid decisions about financial matters earlier than children who grow up spoiled. With that, here are three things you can do while your child is young to better their future concerning handling money.
1. Chores for an allowance
Having your child do chores to earn an allowance is a good way to teach them about making money and responsibility. If they do a great job of helping around the house, give them some cash. If they do more than they are required, give them extra money. Pretty soon, they will like being helpful because of the reward they receive for doing so. Also, they may ask for more responsibility.
Working for an allowance will set a child up to choose a career in which they support themselves and their family in a stable manner. As they recognize the benefits of seeing fruit from their labor, they will enjoy working hard. Also, as they understand the hindrances that come with not having money, they will be less likely to be unemployed later in life.
2. Piggy bank
Having a piggy bank or some type of place for the child to keep their money in allows them to have a sense of ownership. Hopefully, they will want to fill their piggy bank up. This will lead them to understand the importance of continually doing their chores to reach their own financial goal(s).
Everytime they add or take money away from their piggy bank, have them count the left over currency. This will enable them to see how what they save or spend effects their future. It will also teach them some budgeting principles when it comes to making choices about what to spend their earned income on.
3. Bank of "Parents"
Last but not the least, try serving as a bank to your child. You can withhold their money for them as if you were a savings account. Then, explain to them that the longer they let you hold their money, the more money they will make. This will enable them to understand what it means to earn interest.
You can also let them borrow money from you as credit. But, help them to know that the longer they take to pay the money back, the more money they will owe you. This will lead them to comprehend the effects of credit and its interest rates over a period of time.
Kids who grow up with an early knowledge of banking matters are likely to maintain good standing checking and savings accounts. Their understanding of separating money they wish to spend away from money they wish to save will be valuable for future banking relationships. Their knowledge base of saving money in a savings account will encourage them to want to start saving their earned income early.
Lastly, their recollection of the effects of borrowing money from their parents will make them more cautious of loans, credit cards, and cash advances. This will set them up to be able to maintain high credit scores in their adult life.