Kids need to have a firm grasp in understanding money management; teaching your kids the importance of money management will help them to become responsible when making and spending money in their lives. It is every parent's responsibility to teach their kids practical yet effective ways of how to earn and keep money.
Teach by Example
As a good parent, it is important to set examples to your children that are worthy of being copied; be conscious of the fact that kids learn in their immediate environment. As soon as your children started collecting pennies, they were ready to learn about the value of money. It is never too early to introduce them to the importance of money management.
Talk to Children about Money
Explaining how the family budget works is one highly enjoyable activity to teach your kids the importance of money management. You can explain to them how much things cost and how Mom and Dad have to earn money to meet these costs. Point out that money is used to buy foods and clothes and it pays up for things such as your home; the car and their toys.
Allow older children to see your utility bills and explain that money is used to pay for the use of electricity. Show them how they can play a part in reducing the costs of electricity. It is an effective medium to teach the kids that they can conserve and help the family save money. It is also equally important to let them know about setting money aside for emergencies, vacations, family holidays and gift giving.
Give Children a Chance to Practice with Money
Another way of teaching the kids is by giving them allowance. It is important to have a well-implemented allowance program to help children gain a solid foundation on how to intelligently spend, save and invest. You may also want to encourage your kids to donate a portion of their allowance to a charitable cause.
Older children on the other hand have more opportunities to earn money but also more opportunities to spend. A job can help them to finance and manage their own expenses. However, a job should be carefully considered to make sure it does not negatively impact homework. Many teens find that the quality of their school work goes down when they begin to work too many hours.
Appropriate exposure to the working world can expose teens to the reality of earning and being a responsible spender. It is important to let children make their own buying decisions; e.g. clothes, music and electronics. Additionally, you can take them to a grocery store and designate them a week where they can buy the family food. This will be a firsthand experience in shopping wisely. This shopping trip is a good venue to teach them money management by buying what the family needs, how coupons work as well as the value of product research and comparison shopping.
Knowledge is Power
It is also a good idea to explain in the simplest terms how banks and credit and debit cards work. By letting the kids look at the bank statement, you are giving them the clear idea of saving in the bank and how interest works. Explain to them the right way to use credit cards and debit cards. Instill the notion that even though these cards are a convenient ways to make purchases (by the phone or in the Internet) and useful in times of emergency, they still require good money management. Teach them the reality of overspending and crippling debts with the misuse of these cards.
Teaching your kids the importance of money management empowers them to make the right financial decisions; it is not only how much money one makes but how well one manages it that determines financial freedom.