How to Teach Your Children Money Management Skills
You need to teach your children this at a very young age. You should tattoo this point on the back of your hand. One of Britain’s richest men (Richard Branson) said that the first lesson he recalls was from his mother, and it was that he should save his money. And, it is unlikely that Bill Gates was spending his money on designer T-shirts and fortified wine when he was in University. Your children will be living hand-to-mouth all their lives if you do not teach them how to manage their money at an early age. Your children will grow up to see money as something to be spent and nothing more.
Teach your children the importance of saving
This is the most important lesson you need to teach your child. You need to instill a deep respect for saving in the child. He or she must know that saving is the only way to avoid poverty, and that the money they save is not for spending. It is their safety net for if they ever get in trouble, or if something unexpected happens. Keep instilling the message in your child until he or she is old enough to understand it and apply its message.
Introduce them to money at an early age
Be careful how you do it, but try to introduce them to the concept of commerce at a young age. About how one thing may be traded for another and how some items may be saved to get bigger items. You do not have to start with money; you may start with other representations of currency until the child is old enough to know what money is.
Every now and again, explain that you cannot afford things
Children ask for things all the time, and some parents just say no without a reason why. You should give your reasons why, such as how the child already has one or has already eaten, or how he or she may only have it after completing his or her chores. But, every now and again, if you wish to say no, but you have no specific or reasonable reason, just tell the child that you do not have the money for the item. It helps the child to slowly learn that if you do not have money, then you do not get the things you want.
Teach them the math before the money
Teaching them that small numbers may add up to bigger numbers is good, but you also need to account for the fact that one note (in currency) is worth more than a larger number of smaller objects (coins). You could demonstrate the principal visually with things such as Lego blocks. You could show how lots of little items can be added up to make one big item. How even though there is only one big item, it is still bigger and better than a large number of small items. Do not forget that children often value things by how many there are, as opposed to what they are worth. It is the reason that your child wants to play with the peanut shell Styrofoam that came in his/her present’s box, instead of actually playing with the toy it contained.
Do not introduce them to spending first
One of the most common mistakes that parents make is to introduce money to children by showing them how to spend. The children are given money and asked to give the ice cream man the money in return for an ice cream. This may seem like a nice introduction to money, but it is actually teaching your child how to spend, and not how to manage his or her money.
Worse still are the times when the vendor gives change, and because there are now more coins in the child’s hand, he/she thinks that he/she has been given even more money in return. So not only does the child get a reward for spending, but the child also believes that he or she receives more money for spending. As you can imagine, this has a devastating effect on the child’s frame of mind as he/she gets older.
Let them know that work will get them more
People often explain the math of money, and how it can be exchanged for goods and services. But, people rarely explain where money comes from. For many years of the child’s life, he or she will believe that money is just something that appears out of mummy and daddy’s pockets. You need to set parameters for the child and explain that work will get you more money. Explain that you go out to work to get your money, and then set up situations around the house where your child may do chores in order to receive his or her allowance.