Raising children’s awareness on money management serves two important purposes – it helps them understand where money comes from and why it is important to save. Generally, the first purpose is served much sooner than the second as children may take longer to curb their need for instant gratification with all that money can buy. By introducing your kids to money management, you can be assured that they will grow into financially responsible adults
Giving monetary allowances to children
Give your kid a monthly allowance for selective purchases and not unnecessary ones like candy, video games or fashion accessories. Also remember that the monetary allowance given is not lunch money or for clothes, books and other school supplies – this is something that the parent must provide separately. Encourage your kids to save some money from their allowance, put it in a piggy bank or account.
Financial experts believe that monetary allowances should not be associated to house hold chores that kids are expected to do. This is to encourage children’s sense of participation around the house as members of the family and not for additional allowance. An important aspect of teaching money management with the aid of allowances is negotiations. This is a dialogue that both parents and children enter into to help children understand different aspects about money management.
It is possible that children might ask for raises in allowances or advances, but give them fair reasons why this is not possible or right. If your 12-year old insists on an allowance advance for a meaningful expense, encourage him/her to take up a part-time job such as dog-walking or baby-sitting, something that does not interfere with school work.
Helping children understand savings
Mandating that children save money from their allowance is an important step in money management. Explain the importance of saving money in a way that is easily understood by the child. One of the most frequently used methods for saving money are piggy banks and locked boxes into which children are encouraged to deposit money. The benefit of using this is that children generally cannot take out this amount without the key and it will remain safe for their future use.
Raising children’s awareness on managing their money will help them understand how to make meaningful purchases. In the long run, as children develop into teenagers, they will be better equipped to handle money and credit cards on their own.