Teaching Kids Money Management

The following is a guest post from Sara.

Money management may seem like a skill that only those who are in the workforce need, but the reality is that kids need to learnmoney management too. Learning how to manage money at a young age will ensure that they’re much better prepared once they do start earning an income and that they don’t end up in a sticky financial situation. Start teaching your kids effective money management by:

1.       Giving kids an allowance after they’ve completed their chores. Many parents give their children a weekly allowance, but instead of giving it to them on a certain day each week, give it to them only after they’ve completed their weekly chores. This helps them learn the basic principles behind having a job and earning money for providing the services required of that job.

2.       Dividing up allowances into different accounts. Instead of giving your children a lump sum of money, have them divide up their allowance into different sections. Have an “account” for spending and an “account” for saving (these can just be different jars to place money in) so that they learn that money shouldn’t be spent all at once and that saving is important.

3.       Setting goals for items kids want to purchase. When your child asks for an expensive toy, such as a Nintendo or an iPad, show them how much it costs and then help them figure out how long it will take them to save up for it. Explain that by setting aside a certain amount each week they’ll be able to purchase the item much faster than if they saved a smaller amount. When they want to buy things at the store ask them if it’s more important to them than buying their larger goal purchase. This will help them learn to think about purchases before impulsively buying things.

4.       Show kids how to shop sales. Take kids with you to the grocery store or to the mall and show them the sale aisles or racks and comparable regularly priced items. Explain how sales work and how shopping sales can help you save money in the long run. Exposing them to shopping smartly by shopping sales early on will help reinforce this type of behavior for them so that they can do the same as they begin shopping on their own.

5.       Model the type of behavior you want them to have. The best way to get kids to learn is to show them through your own actions. By living your life a certain way – budgeting for purchases, shopping the sale racks, cutting coupons, saving up for big ticket items – you’ll show them how to live their lives that way as well.

You can never be too young to start learning about effective money management skills, so don’t shy away from talking to your kids about the importance of carefully handling and managing their money. These are skills that they’re going to use throughout their lives, and the earlier they learn the better.

Sara is an active nanny as well as an active freelance writer. She is a frequent contributor of NannyPro.com.