Some people in today’s economy struggle financially because they had not acquired the skills and habits necessary to pay their bills timely or save for emergencies. Their lives just went from one paycheck to the next. Financial responsibility simply was not instilled in them as children. Money management is a learned attribute. Unfortunately, it usually isn’t taught in many households, particularly in impoverished homes, or in schools. Most adults gained their financial habits watching their parents who, in turn, watched their parents, and so on. This lead to the vicious cycle of living beyond one’s means. Children should be taught money management skills as soon as they gain the ability to count, add, and subtract.
Money management is not a difficult concept to learn. The challenge arises when in maintaining the discipline needed to save money or to spend it wisely. Starting as a child, this discipline can be cultivated and developed. As they grow older, they will understand the importance of saving, investing, and living within their means. It will become a part of who they are and they will teach it to their children and so on. A cycle of wealth building and financial responsibility is born.
To begin teaching a child the importance of money, it’s best to start with them learning the value of it. Help them to understand the differences between the coins and then the dollars. Teach them that a nickel is worth more than a dime even though the dime is smaller. Show them how many coins it takes to equal one dollar bill. Keep it simple at first, gradually showing them different combinations of coins worth different values. As their math skills improve, so will their understanding of how much money is placed before them.
Giving your children money will help in the learning process. Having them earn it will instill in them the true importance of money management. Setting up an allowance agreement with your child will teach them one valuable lesson… if you don’t work, you don’t get paid. Let them know that’s how you earn the money you pay their allowance along with other household expenses. In fact, include them in family discussions about the budget. They should gain an understanding about how much money comes in the home and how much goes out to cover expenses.
Using the family budget will also provide you with an opportunity to teach your child the difference between needs and wants. They must understand that needs must be fulfilled before wants can even be considered. Also, after the needs have been taken care of, then the choice must be made on whether to acquire wants now with what’s left over or save to acquire them in the future.
Teaching your child about financial responsibilities will greatly pay off in the long run. They will take what they learned into their teenage and adult years, applying their lessons every step of the way. Eventually, as adults, they will have set aside a nice nest egg, maintain a good credit rating, and have more financial flexibility than most of their peers.