Plenty of young kids believe the bank doles out money anytime you need it. When our kids ask to buy a toy or other treat, it is important to talk about the value of money and how money is earned. Kids also need to learn about saving and managing money. These are all important conversations to have, but practicing these lessons with their own money can ingrain good financial habits in kids that last well into adulthood. Here are a few ways to give children the experiences they need with money to help them become responsible savers and spenders.
- Let kids earn an allowance. They’ll quickly understand the value of their work, and take pride in a job well done. When you give them their allowance, use denominations that inspire saving and giving to charity. For example, if they receive 5 dollars a week, give them 5 ones so they can easily divide the money for spending, saving, and charity.
- Take kids to the bank or credit union to open their own savings account. Help them check their savings account statements to view the interest they’ve earned each month.
- Bring kids to the store to let them observe how you make spending decisions. They can learn about comparing prices, coupons, loyalty cards, sales, and the idea that purchasing items in larger quantities can sometimes be cost effective. Many of Learning Resource’s grocery field trips introduce smart shopping concepts and let kids practice “spending” money wisely.
- Let kids make their own spending decisions. Sometimes they’ll make wise decisions and other times not such wise decisions. But often kids learn from their mistakes when they make them independently.
- Charge interest on money that you lend your kids. This will give them a taste of how organizations loan money and will help them make future spending decisions.
- Let your kids run a neighborhood rummage sale or set up a lemonade stand. Students will learn about the hard work that goes into earning money as well as the skills needed to handle money.
T.Rowe Price did a survey and found that kids who were given an allowance and the opportunity to make their own spending decisions were more likely to say they felt knowledgeable about managing personal finances. Of course, conversing with our kids about their experiences with money reinforces each lesson and gives them the opportunity to ask questions and think about how they can continue to make good financial decisions in the future.