What All Parents Should Teach Their Children About Money

The Importance of Teaching Your Child About Money

Children need to understand the importance of money and the cost of things from an early age so that they can practice this understanding and learn the importance of financial management through experience from an early age. But the kids aren’t going to learn this on their own, this is where parents need to play a proactive role to develop their understanding.

In this article, therefore, we have compiled a list of 8 points that all parents should teach their children about money.

1)Start an Allowance

Offer them an allowance each week, for a certain number of chores that they have done. A good rule of thumb is one dollar per week per year of age.

This helps them understand the value of money and start them on the path to being a saver. It helps them learn how to manage their money, which is really a valuable skill to have.

However, you need to be aware that giving your children an allowance for doing chores could become problematic. It is a good idea to never give an allowance unless a specific chore is completed.

You should also make sure that they understand that this money is for their own spending, not for spending with friends. This is another great way to teach them how to manage their money.

Also, you need to realize that an allowance isn’t a perfect solution. They may blow all their money in the first week, and be left with nothing for the rest of the month.

Be sure to plan for this situation. Don’t just let them have money when they ask for it. Plan to give them the money before they need it.

Also, consider saving some of the money for them. Put it in a savings account or give them a book of postage stamps. This will help them learn how to save and still have some fun with their money.

2)Teach Your Children About Saving

Children are capable of understanding the importance of saving money.  Teach them how to save their allowance. Give them the option of saving or spending, and then make sure that they put at least half of their allowance into savings.

Be sure to demonstrate to them what you would do with the extra money. You might use it to buy new clothes, or to take a trip, or for some other goal.

Help them to understand that saving money can help them do something special with their money.

3)Teach Your Children About The Differences Between Wants and Needs

One of the best ways to teach your children about money is to teach them how to differentiate between wants and needs.

A good rule of thumb is that wants are things that you can live without, and needs are things that you cannot live without.

Talk to your children about the difference between the two, and help them to understand how important it is to save money for their future. The best way to do this is to include them in the discussion when you are making your grocery list. The quickest way to teach anything to kids is through active participation.

Also See: How to Quickly Make Money Online in Australia

4)Teach Your Children About Credit Cards

Not only is it important to talk to your children about credit cards, but you need to demonstrate to them how to use credit cards responsibly. Some people may feel that it is too early to teach pre-teen kids about cards but look at the pace at which the world is changing. We have already got virtual cards and cryptocurrencies. In all likelihood by the time kids of today grow up, cards may very well be replaced by e-wallets.

So start teaching them about cards early on because cards have become an important instrument. They will be more likely to use credit cards wisely if they can see that it is possible to use them without going into debt.

Have a responsible adult set up your child’s credit card in their name, and let them use it to make small purchases, like school supplies or lunch at school.

Make sure that they understand that they have to pay the credit card bill each month.

This will help them understand that you have to pay back what you borrow and that credit cards are an easy way to spend more money than you have.

5)Teach Your Children How to use a Debit Card

Debit cards are an excellent way to teach your children about using money. When they buy something, the money is taken out of their account immediately.

They don’t have to worry about how much they spend or how much money they have left. This can help them learn how to budget their money.

It can also help them learn how much something costs, by looking at the cashback in their account.

6)Give Your Children Money to Invest

One of the best ways to teach your children about money is to actually invest in their futures. Let them invest in their college savings, or in some other investment that they understand.

This will help them to see that investing can pay off. It will help them understand the importance of saving for the future. This will also teach them how to manage money and make smart financial decisions.

7)Teach Your Children About The Stock Market

One of the best ways to teach your children about investing money is to teach them about the stock market.

It may seem too difficult to comprehend, but once they see that you are willing to invest your money in the stock market, they will start to understand the concept. For a young child, use simple terms to explain the market and talk about why you buy stocks.

8)Teach Your Children About Entrepreneurship

Many people dream of starting their own business. Children are no different.

Encourage them to dream big, and even invest in them. Give them the tools that they need to become a successful entrepreneur. Help them to see that entrepreneurship is a way to earn money. Give them a small amount of money to start a small business. Give them their own website, or teach them how to set up a store on eBay.

Encourage them to save their money and to invest it in themselves. This is one of the best ways to teach your children about money.

It is vital to open the minds of children about the concept of money and financial management from an early age. The minds of children are incredibly powerful when it comes to learning new concepts. Whatever they will learn at a young age, at home through experience and interaction with parents, will stick with them for their lifetime.

Also See: Finance Tips I Wish I Had Known at 18

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Fun Fact

What are the 3 most important things a parent can teach a child?

“Be thankful for what you have,” “Be respectful,” and “honesty is the best policy” Teaching children how to appropriately give money away can help them develop valuable financial skills such as budgeting, and it may also contribute to their well-being later in life, according to a new study.

Australia Unwrapped provides only general and not personalized financial advice and in no way has taken your circumstances into account. Investments go up and down; any questions, talk to a financial advisor. This blog is opinion only, and in no way should investment decisions be based on this information.

Australia Unwrapped does not endorse or vouch for the accuracy or authenticity of postings, comments or the article.

Dave P
Dave P
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