Teaching Kids about Money Management
The earlier you begin educating your children about money management, the better equipped they will be to handle their finances in the future.
Children can be taught about money management from a young age. Around age four or five, your children should be able to understand how to make change. By age nine or ten, they may be old enough for a bank account and possibly a debit card. The earlier you begin educating your children about money management, the better equipped they will be to handle their finances in the future.
What to teach kids about money management
There are five main lessons your kids should learn about spending and saving money wisely.
- Delayed gratification
Begin by teaching your kids how to save for what they want. Money experts say that this is a critical skill for adults as well, so do not give in to any temptation to help kids by giving them more money than you normally would. Be the strong adult role model and insist that your kids save before spending.
- You can’t have it all
Teach your children how to make choices about their money and where they spend it. Explain that money is not unlimited, and once the money has been spent, you cannot buy more things because you do not have more money. Help your kids by involving them more in financial decision making.
- Saving money can increase it
Teach your kids that the sooner they save their money, the quicker it can multiply through compound interest. Talk about short vs. long term goals. Teach them about compound interest and how they can earn interest on their savings and on the past interest that is still in their savings.
- College has a price
Help your kids find out how much each of their options will cost. You can find a good picture of the semester expenses on most college websites through utilities such as “student budget” or “student expense” tables. This is also a good opportunity to remind your kids that with an education they can earn more than someone without an education.
- Pay your balance monthly
Teach your kids that the only time to use a credit card is when you can pay off its balance in full. This is a good time to talk about credit and how credit history can affect future loans. Explain that items bought on a credit card now have the interest cost added to them unless they are paid off in time. For instance, a $100 pair of shoes would cost $119 after the end of the month if not paid off.
It’s important to still a strong sense of financial literacy in your children at an early age to set them up for a better future. For more information about how D & A MacLeod can assist you, please contact us at one of our nine convenient offices, including Kingston and Ottawa, today.