TEACHING CHILDREN VALUABLE
MONEY SKILLS
One of the challenging and many times emotional aspects of parenting is allowing your children the freedom to learn from their own mistakes. As parents, we want to protect our child from harm, but if sheltered too much, they won ' t be ready to deal with real-world challenges when they leave the nest. This is also true for managing money.
By Jarvis M. Brunson
One of the keys to teaching children sound financial habits is by setting a good example with your own spending behavior. Children may not say anything, but they are watching your every move. If like clockwork you are constantly spending beyond your means, don ' t set aside emergency savings and don ' t have a budget, your children will pick up on it and consider this normal financial behavior. Eventually, they will begin to imitate your behavior and set themselves up for financial difficulties later on in their lives.
The first step in teaching your children valuable money skills is to be the example and get your financial house in order. Here ' s an idea for you. While you are getting your own financial house in order bring your children into the process. At the beginning of it. Don ' t hide the fact that your finances need tidying up. Rather, use it as a learning experience for your children and you.
Involve your children in the family budget process and even a budget for their expenses too. You can start your child on a budget as soon as you start giving them an allowance.
The goal of an allowance should be to teach children how to handle money wisely, not to reinforce good behavior. If your child misbehaves this might think it ' s okay to forget completing chores, getting good grades or treating others well, if the only consequence is missing out on a few dollars. It ' s fine to link those good behaviors to a developing a sense of family responsibility and cooperation. Plus, when you put a price tag on good behavior, you might start seeing an outburst palm every time you ask them to answer the phone or pass the salt.
Develop a needs-based allowance amount. Track your child ' s discretionary( toys, candy) and nondiscretionary( school lunches, school supplies, clothing) expenses.( You ' ll be shocked). Then, depending on their age and maturity level, decide which expenses you want them responsible for managing, and set a reasonable amount for each category- this will be their allowance.
Start out slowly with only a few discretionary expenses, then gradually add others, and increase their allowance as they become more confident. Realize that they ' ll probably make a few mistakes- that ' s part of the learning process.
Now if you are like my wife and I, and like to keep things simple, then here is an alternative way of creating a budget for your child.
Get three large jars with twist-off tops. Put a label on each jar. On one jar write " Giving," the next jar " Saving," and the third jar " Spending."
When you give your child an allowance they will take 10 % of their allowance and put it into the " Giving " jar, 40 % into the " Spending " jar, and 50 % into the " Saving " jar.
In the beginning of this process you will need to provide guidance to your child in calculating the different amounts.
As a parent it is important to teach children how to give. The money that they accumulate in their " Giving " jar is for the purpose of blessing others. As the parent you will need to talk with your child regarding where this money should be distributed. It is important that your child have input in this process of determining where to give their money.
The money accumulated in the " Spending " jar is for your child to spend without any limitation of how much of it can be spent. Once the jar is empty, oh well, wait until the next allowance check!
Finally, the money in the " Saving " jar is not to be touched. This is where the parent and the child discuss and determine what the goals are for the money that will be saved.
It is important to remember, your child cannot take from one jar to replenish another jar. That ' s like borrowing from " Peter " to pay " Paul," and as adults we don ' t do that, right?
Use an allowance to teach important life lessons.
Remember, the sooner your child learns how to manage their own money, the sooner you ' ll be able to concentrate on your own.
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