Teaching children the discipline of wise financial decisions is an important lesson in their life. All too often money matters go unaddressed leading to poor financial habits in adulthood. There are habits that can be taught in early childhood to help prevent mishandling money later on.
Five Ways to Teach Kids Frugality
Don’t Overestimate their Understanding
Many parents make the faulty assumption that their children automatically know how money is acquired. More often than not, your child doesn’t understand you must first earn money in order to receive it. It is unnecessary to pull out a check stub and explain each category, but an explanation on your child’s level can be beneficial to their understanding. This initial step will help a child grow patience as they learn money is something that must be earned first.
Define What Work is
Once your child has a good understanding of how money is earned, you give them examples of what work is. Chores are often a good way to reinforce the time and effort it required to earn the money they want. Your goal is to get your child to begin to think about what they want and what it will take to receive it. When a child makes the connection between expending time to perform a chore, they begin to think carefully about the money they earn.
Provide a Simple Managing System
When a child earns money they will need to learn to manage it correctly. Discourage the practice of spending all the money they make without saving. A general rule of thumb is to put ten percent in savings, and use the other ninety percent for spending. If your child is in primary school, two piggy banks or receptacles are adequate to store the money earned. When you teach how a bank account should be used, talk about savings and spending money differences so they know how to separate their own earnings.
Give Realistic Consequences
Providing straightforward consequences to the mismanagement of the money your child earns can prevent poor habits later. In fact Exelby & Partners Ltd list bad credit from excessive spending as the top reason clients file for bankruptcy in Edmonton. If your child is too young to fully grasp this concept, playing a board game like Monopoly can assist in showing real consequences like excessive spending, money management and debt.
Nothing will be more tempting than trying to shield your child from the real consequences of mismanaging money. Keep in mind that if they learn the negative consequences now, the better they will become with handling money later. Children are extremely impressionable, so allowing them to reap real consequences of spending too much will be very effective in teaching.
If you find that your own spending habits have been poor, take the opportunity to practice what you are teaching. Your instructions will be taken seriously if your child witnesses you making smart financial decisions. With time, your child will have a better appreciation of what it takes to provide what your family needs.
Do you have any tips to teach kids frugality?
Guest Post written by Brooke Chaplan. Brooke is a freelance writer and recent graduate of the University of New Mexico. She enjoys hiking, biking, running and blogging about many different subjects including family, home and fitness. Contact Brooke via Twitter @BrookeChaplan
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