The following tips outline a variety of strategies for teaching children how to manage money.
Lead by example
"A parent's relationship with money will teach kids a lot more about money than any one 'philosophy,' " says financial blogger Dawn Anderson. She encourages parents to lead by example. "Get your financial house in order. Teach your kids to be fiscally responsible by controlling your spending, eliminating debt, having an emergency fund and not wasting money or resources," she explains.
Encourage kids to allocate their money
One philosophy Anderson says she does believe in is making children put away one-third of their money for college, one-third for future items and to keep one-third for everyday expenses. "When they are old enough to understand charity then I suggest introducing the fourth category of saving to help others. It doesn't have to be a formal charity per se. It could be buying toys for a children's hospital or groceries for a food bank," she adds.
Challenge children to put their own money toward major purchases
As much as you might want to, you probably can't afford to buy your child everything he or she wants. Andrea Woroch, a consumer and money-saving expert, recommends splitting some purchases 50/50 with your child. "Tell your kids if they want something expensive, like a new bike or designer pair of jeans, that you are willing to split the cost as long as they can save enough money to cover 50 percent of the purchase. This will teach your kids and teenagers the value of their money and help them appreciate the purchase," she explains.
Reward your children for successful saving
Over time, children may lose interest in saving their money or become frustrated when they want something they can't yet afford. To keep children motivated and enthusiastic about saving their money, establish a system that will reward their efforts.
Mikey Rox, a staff writer for the personal finance website WiseBread.com, says, "A nice way to reward the child for reaching a savings milestone is to establish an amount they can spend once they've hit a certain point. In the beginning, maybe you'd like to set the bar at $50. If they reach that goal, tell them that they can spend $5 of the saved money. Each time, raise the bar a bit higher. By continually giving your kids savings goals and also providing them with rewards, they're more likely to stay interested in saving and feel good about doing it."
Give your kids a crash course in couponing
Woroch encourages parents to teach their kids about the benefits of using coupons. "Have your kids find coupons in the Sunday circular or online via sites like CouponSherpa.com. You can make a game of it by seeing who can find more coupons or those with the biggest discounts," she explains.
Remember that your children aren't born knowing how to save money and spend responsibly. If you want your child to develop money management skills, you'll need to set a good example for them and make extra efforts to demonstrate the benefits of being financially savvy.
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