Do you want your children to make smart financial decisions once they grow up? If so, you should start teaching them money management strategies as soon as they learn how to count. Although budgeting and saving may seem like grown-up concepts, it’s never too early to teach kids about money and how to effectively manage it.
If children learn about the value of money at a young age, they are most likely to follow those lessons during their adulthood as well. This way, you will technically be hardwiring them to save money by being a wise spender, which is probably one of the most important life skills one needs to learn in order to survive in today’s world.
Depending on how old your kids are, you’ll probably want to keep these lessons as simple as possible. However, if you’re not sure how to teach kids about money, here are a few simple ways you can make sure they turn out to be money-savvy adults.
Tips on How to Teach Kids about Money Management
Here are a few tips to teach kids about smart money management that all parents must follow.
- Explain the concept of money and how does it work
- Given them an allowance and help make a budget
- Provide extra income opportunities
- Teach them to set goals
- Involve your children in financial decisions
- Help them become a wise consumer
- Lead by example
Let’s discuss these tips for teaching kids about money in detail.
Explain the Concept of Money
The first thing you need to teach kids about money is that it does not grow on trees. Banks do not give you cash for free and the ATM isn’t a magic box that hands out notes when you need them. Children need to learn that money is a finite resource and banks just keep it safe for you.
Start by teaching them how you work hard to get a specific amount at the end of the month. If your kids are pretty young, teach them how to count the smaller denominations. Make sure your children understand that once you buy things such as candies and toys, the money in your bank account is gone until your boss pays you again.
This will teach your child the value of money and help them understand that they can’t buy whatever they want whenever they want it. It will also encourage them to make careful financial choices.
Teach Them to Make a Weekly Budget
Unfortunately, budgeting is something that most adults struggle with. However, budgeting for kids might be easier than you think.
In order to teach kids about money management, you should also start giving your kid a small weekly allowance. After all, you can’t teach them how to manage money if they don’t have any. Then, tell them about the basics of budgeting.
You can simply start off by giving them three different boxes labelled “Saving,” “Donating” and “Spending.” Explain the purpose of each box and ask them to divide their weekly allowance into three portions, each meant for a particular money box.
For households with teenagers, using a budget spreadsheet might be a better idea, as it will help your kids keep track of their spending habits. You can even ask them to create an outline of what they plan on buying and how much they are going to save for the month. If they have a friend’s birthday party coming up, tell them to dedicate a small amount in their budget to buy a gift.
Creating a budget and noting down expenses will give children a fair idea of where they could’ve saved money. It will also keep them from spending their allowance as soon as they get it.
If you are an adult who’s having a hard time maintaining a budget, take a look at our step-by-step guide on how to manage your household budget to learn more about this particular skill.
Provide Extra Income Opportunities
Apart from giving children a fixed allowance, parents should also create opportunities for extra income by asking them to do extra chores.
For instance, you can ask them to set and clean the dinner table or fold the laundry every once in a while. In return, you can pay them a small amount and then help them decide what to do with it.
It’s important to teach kids at a very young age that they have to work to earn money. However, make sure your child doesn’t tie the concept of allowance to daily household chores. They should not be paid for tasks such as completing their homework, cleaning their room or helping around the house. Children should do all of these things because they are a part of the family, not because they expect to be paid for their work.
Teach Them to Set Goals
Another smart way to teach children about money is to help them create a wish list.
Setting goals for the future will encourage kids to set priorities and then work towards achieving them. If your child wants to buy something, like a certain toy or book, ask them to include it in their budget worksheet. In case they have multiple wishes, sit down together and rank them in order of importance. You can also help them set long-term financial goals, such as a dinner at their favourite restaurant or a holiday trip.
Along with teaching children about money management, this lesson will also help them learn the importance of saving. Depending on their age, you can introduce them to a savings account as well. Most banks in Pakistan offer special savings account for children under the age of 18 years. You can visit your nearest branch of a reputable bank to find out more about their policies.
It is a good idea to explain to your kids how banks work and how their money can grow with interest over time.
Involve Your Children in Financial Decisions
Most parents avoid talking about money in front of their children. Sure, overexposing your kids to financial troubles is never a good idea, but it’s important for them to know what’s going on. While it’s not recommended to involve your children in conversations about loan-repayments and such, it is imperative to include them in the monthly household budgeting for groceries and other utilities.
In order to teach kids about money, include them in some of your financial decisions as well. If your utility bills are too high, discuss with them ways to reduce electricity consumption. Similarly, ask for their assistance while putting together your grocery list and explain how buying food costs a large chunk of money. As your children grow, you can even discuss ways to manage overall household expenses and introduce more income streams.
This is a valuable lesson about money management for kids that they will definitely carry into their adult lives.
Help Them Become a Wise Consumer
It is pertinent to teach young kids the difference between “needs” and “wants.” If you’re teaching kids the value of money, you should also help them become wise consumers. One of the best ways to go about this is to take them grocery shopping with you and tell them about some of the most common tricks companies and advertisers pull to sell their products. Parents should also ask their children to look out for discounts while shopping and how to not let certain marketing gimmicks influence their decision.
Moreover, teach your children to read the fine print from an early age and compare product prices. Don’t forget, you can also teach them how to save money by avoiding some of these common grocery shopping mistakes in the future.
Similarly, when you go to the bank, take your kid along so he or she could get familiar with the environment and would know how to make simple transactions. Once they grow up and start earning their own money, these childhood lessons will definitely help them out.
Lead By Example
Last but not least, you must lead your children by example.
All kids consider their parents a role model. So, if you want to teach your children about money, keep an eye on your own financial decisions. Make sure you pay your bills on time, don’t visit a grocery store without making a checklist, don’t splurge on things you don’t need and save up some money for emergency situations. You can only teach your kids about money management when you have your own finances in order.
To put it simply, be smart about your expenses.
Here are some easy tips for adults who want to learn how to save money while living in Pakistan.
For more tips on effective budgeting and money management, stay tuned to Zameen Blog, the leading lifestyle blog in Pakistan. Also, make sure to subscribe to our newsletter to receive the latest updates about the real estate trends. If you have any queries or suggestions, feel free to contact us on blog@zameen.com.
