Children are great, aren’t they? Parenting is tough sometimes, but the rewards that pop up unexpectedly make the parenting challenges worth it all. As parents, most of us want to provide our children with a strong foundation of values and knowledge. It is our responsibility as parents to include the teachings of how to manage money responsibly.
Children are taught in preschool about computers and how to use them. If they are able to grasp the concept of computer technology, they probably can grasp the concept of money. Preschool-age children are generally the best age to begin teaching.
The most popular method of introducing money management to children is to give them an allowance. You should determine the amount that best works for your family. One example is to give children one dollar for each year of their life as their weekly allowance; so at age 3, a child would receive $3 per week. You might want to consider giving the allowance in coins rather than dollars and assist them in learning how to count their money at the same time. Introduce the different coins to them as they learn each one.
You should develop a very simple plan for your children’s money using the concept of immediate spending, short-term goals and long-term goals. For example, you may want to separate the children’s money each week into thirds using jars or clear containers: One-third goes into the “spending jar” (which can be spent immediately on anything), one-third goes into the “short-term savings jar” (to be saved for larger purchases the child wants) and one-third goes into the “long-term savings jar” (to be put into the bank). The children will be able to see the money add up and plan some of their own purchases.
You can also teach young children about money by letting them earn some extra money. This is above their allowance. You can allow them to earn money by doing extra chores around the house or for neighbors. You should add this money to their savings jar.
Assist your children with a simple budget/savings plan. Help your children make a list of the things they want to purchase with their money. Prioritize the list. Help them cut out pictures of the items they want to buy and tape them to the list. Tape the list to the outside of the money jar as a visual reminder of why they are saving. As your children see more things they want, help them add to the list and reprioritize. Try to help them aim for purchases they can obtain within three to six weeks so they do not lose interest.
At some point, you will want to open a savings account at a bank for your children. You might want to do this to coincide with the time they are able to print their own name. Allow them to “sign” the bank paperwork when opening the account so they feel a part of the process and recognize it is their account. Periodically, have them take their long-term savings jar to the bank to add to their savings account. Congratulate them when they add to their savings account balance.
Young children can learn a lot about money from playing math and money related games. Look for educational software or board games. There are also books available that deal with money. One book for young children is “Alexander, Who Used to Be Rich Last Sunday,” written by Judith Viorst. Another book that tells children everything they could ever want to know about money is “The Kid’s Money Book,” written by Neale S. Godfrey.
While using these examples to begin teaching your children about money, be sure to remember the most important thing you can do is to set a good example. The second most important rule is to keep it SIMPLE and FUN.
As your preschool-age children grow, continue with the children’s budget and goals by making adjustments that are age appropriate. With teenagers, you may want to consider giving them 1/12 of their clothing budget each month and allow them to manage the money by using their budget and goals. The key is to continue throughout their life to teach them about being financially responsible. You will reap the rewards as parents! For more information regarding this topic or any other tax-related issue, please call Henssler Financial Tax & Accounting Division at 770-429-9166 or [email protected].