How To Teach Your Kids About Money Management
Financial skills are important for a successful life. It’s surprising that our schools don’t really teach children about money. However, you can teach your child important financial lessons, and you should. If you don’t start teaching your kids about money and how to manage it, somebody else will. And that’s not a risk you want to take! Let's show you how to give your kids the head start you wish you had so that they can win with money at any age.
Introduce young children to small notes, like 5, 10, 20 and 50 naira first. Teach them the value of money and encourage them to save in a piggy bank. Use a clear piggy bank or jar so that kids can actually see their pile of money grow. Create three jars – each labelled “Saving,” “Spending” or “Sharing.” Every time your child receives money, divide the money equally among the jars. Have him use the spending jar for small purchases, like candy or stickers. Money in the sharing jar can go to someone you know who needs it or be used to donate to a friend’s cause. The saving jar should be for more expensive items.
Parenting starts and ends with leading by example, because kids imitate their parents all the time. Explain what you are doing when you write a cheque, use an ATM card, and pay for groceries. Avoid making an impulse purchase, and tell the kids you're going to wait one day instead and see if you really want to make the purchase. Kids are very observant and will learn many of their money concepts by watching you and copying your behaviour.
Explain to children how compound interest works and show them how their money grows in a savings account. Expand to a checking account once they are ready. Some parents even open a savings account for their children at birth. The first deposit made is the total money the baby received as gifts during his naming ceremony and child dedication. Over time, the interest accrued becomes tangible enough to pay fees or another major purchase.
For instance, explain, “The reason I chose the no-name grape juice rather than the brand name is that it costs less and tastes the same to me.” You could also talk about deals, such as buying everyday staples like paper towels in bulk to get a cheaper per-item price. Explain shopping on sales and why it is important to cut cost whenever possible. Children need to know how not to be extravagant.
Allow your children to plan and budget for a family event to practice their budgeting skills. Help them also understand the opportunity cost of spending money on one thing, that may keep them from having enough money for other things. Help your child set a budget by first discussing wants vs. needs. You can reinforce this idea by going over the family budget with your child and discussing your family's needs vs. wants.
Many successful financial milestones are achieved by goal-setting. Encourage your children to set savings goals and work towards them.
Occasionally, offer your child an opportunity to make a small amount of extra income by doing an extra chore. Help them decide what to do with the extra money they earn.
Contentment starts in the heart. Let your children know that their toys and clothes and shoes may not be the latest things in town, but they still work well, look good and will last a couple more years. And you can still throw a memorable, milestone birthday party without spending a chunk of your retirement savings funding it!
These days, skills are getting more recognition than university degrees. Education is important, but learning a skill is equally very important. Encourage your child to learn a skill in an area that interests him, whether it is tailoring or baking or making shoes. You never know what will become their money spinner tomorrow. Many of our society's celebrities added skills to their education and are all the better for it today.