Helping your child learn how to manage their money is a great way to prepare them for the future. Summertime is an excellent time to start financial habits with your children that will pay off, whether it’s at a part-time job, a small allowance, or even play money!
Here are some quick and easy tips on how to do this:
1. Set a budget
Help your child set a budget for daily, weekly, and monthly expenses. This will help them understand how much money they have to spend and how to plan for expenses. Even for small kids, making a simple budget can help them understand how money is a limited supply.
2. Give them an allowance
Give your child an allowance to teach them how to manage their money. This is especially helpful to younger children who can’t yet work part-time jobs. Allowances encourage independence, provide a sense of responsibility, and allow your child independence and control over their money. This allowance does not need to be a large dollar amount – even a small allowance can drive home the importance of growing your child’s funds.
3. Encourage them to save
Encourage your child to save a portion of their allowance or earnings. Do they have a particular toy they want, or Roblox bucks they keep asking for? Helping them see their savings while working towards a goal with visual aids (like a jar you fill up or a coloring sheet of blank piggy banks that you color in every time you put more funds in) can help them see their progress. This will help them understand the importance of saving for the future and developing good financial habits.
4. Teach them to comparison shop
Teach your child to compare prices before making purchases. This will help them get the best value for their money and develop good shopping habits. It also helps them start to understand the quality of a product and learn about its value.
5. Discuss money decisions and opportunity costs
Have conversations with your child about money decisions, such as whether to buy something now or wait until later. Is getting a new pair of shoes a need or just a want? If the shoes are purchased now, then the snowboard they really want won’t be able to be purchased until much later. This will help them understand the thought process behind making smart financial decisions.
6. Let them make mistakes
It’s important to let your child make some mistakes with their money. Burning through their weekly allowance in the candy isle has a lot lighter consequences than defaulting on a mortgage. Letting them make mistakes while in a safe environment with low risks is better than having them make mistakes when the risks are higher later in life. This will help them learn from their experiences and develop better financial skills in the long run.
7. Encourage generosity
Help your child understand that money can also benefit not only themselves, but others. Is there a cause that they might want to help support through a small donation? Generosity can have positive effects on children’s mental health. Research has shown that children who engage in generous behavior experience greater happiness, reduced stress, and improved well-being.
Just like any good habit, starting young is the best practice. Helping your child develop a good relationship with their money early on sets them up to have a good foundational relationship with money for the rest of their lives.
When you’re ready, stop by one of our Deerwood Bank locations to open up a Buckaroo Savings Account to help your child learn the importance of saving!