Photo credit: verymom via Flickr
The natural inclination with money is to spend quickly and carelessly for as much pleasure as possible. This tendency is the reason so many get into trouble overspending, borrowing to spend, and never saving. It doesn’t have to be this way, however. All that one needs to do is to think about their money as they spend it, and to live within their means.
As hard as it can seem for adults to be responsible, it tends to be particularly easy when you start young. If you’d like to make sure that your children do learn to think about money the right way, it’s easy enough. Here’s a simple roadmap.
For children under five
Very young children don’t really understand what money is. They do understand that money is somehow valuable, however, and something to be treated with care. When you give your children play money to save, they may be reluctant to let go of it. Reluctance letting go of money, by itself, can be a great lesson to internalize.
A game where you let the child buy stuff from you in exchange for money can be a good idea. Your child will not like the feeling of letting go of any money, even when there are goods to be received in exchange. The more opportunity you give for your kids to feel such reluctance, the more strongly it will stick.
A kid of five understands money far better. Clipping coupons with your kid can be a great way to help them develop a taste for savings and discounts. Playing store or restaurant is fun at this age, too. Kids are able to learn how to make change, learning valuable money and math skills in this way. You can use play money.
When your kid is seven or eight
Kids at seven love bank accounts and opening one can be both a treat and an important way to teach money. Kids this age receive an allowance and can learn to begin saving for a rainy day. Making a big deal of those savings now can help make a lifelong habit of putting money away for an unknown future.
Ten can be a big age
A 10-year-old is practically a grown-up as far as concepts of money go. Taking your child grocery shopping can be a great way to help teach comparison-shopping and shopping to maximize savings. Let your kid experiment with branded goods and generic ones. Comparing them for quality, your kids can understand that paying a premium for brand names isn’t always important.
Putting your kids in charge of a yard sale can offer excellent lessons in money skills, too. Your kids will learn how to haggle with customers and think on their feet when dealing with money.
Between ages 10 and 15
As a kid inches towards adulthood, the natural instinct of needing to shop for recreation can begin to come up. If your lessons have helped, your kids should be able to hold back and spend only as much as they can afford. Kids should begin learning to start simple investment portfolios, and budgeting for savings, no matter how meager earnings or allowances may be.
Over the age of 16
With college and independence around the corner, it’s vital to start a kid’s 16th year with a credit card application. Credit cards can be tremendously confusing, even to adults who have spent years with them. Being responsible for a credit card can give a kid important opportunity to learn about interest rates, spending limits and minimum payments.
The more time you give yourself to supervise your kids’ credit card habits, the more likely they are to learn important lessons to carry for life.
Financial responsibility is all about learning to step away from the love of instant gratification. It can take years of practice. When a parent is willing to start a kid off young, however, these are lessons that come easily.