ABCs of Money: Teach Your Kids Fiscal Responsibility

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Parents wonder, how do I raise a financially responsible child?  When do I begin teaching my child about money?  Where is the balance between starved and spoiled?  How young is too young for a child to begin earning money of their own?  How do I teach my child to manage money? Remember, teaching your child about money is a process, not an event. Here are the best ways to teach your child, of any age, how to respect and manage money.

Toddlers/Young Children

As soon as your child is old enough to beg for a toy or treat at the grocery store [and throw a tantrum when you don’t buy it,] you know it’s time to start teaching about money. 

Start with coins:  Teach children to distinguish and learn values of each coin.  Provide jar or piggy bank for storing coins. 

Play with scissors: If they can hold a pair of scissors then they can cut coupons. Teach your children how to look for the coupons and explain that coupons hold value just like coins. 

Miniature wallet and coupon holder:  Take your lessons to the store by purchasing a small wallet or miniature accordion file at the dollar store to carry coins and coupons.

Make coupons a game:  Turn couponing at the grocery store into a scavenger hunt: ask your child to match each coupon to the products on the shelf.

Hand over the money/coupons:  At checkout, let your child hand over the coupons with the money, to solidify that these are both valid forms of payment.

Personalize savings: Show your child the receipt and point to the number with how much you saved.  Then, put that number in terms of something your child will understand.  We saved $14 dollars, which is enough to ride on 5 rides at Chuck E Cheese or buy a new ball. 

Savings goals:  The concept of buying something tomorrow instead of today is a difficult for kids to understand. In order to get little ones interested in the concept, you may need to exaggerate the benefits for them at first.  When your child uses a couple coupons at the grocery store, or does a chore for a neighbor, you could let them set money aside to save for a new bike.  Obviously, your 4-year old won’t have the capacity to save for a bike without your help, but with visions of shiny red and chrome, you’ll internalize the concept quickly.

First taste of entrepreneurship: Give your kids there first experience with earning money by helping them create a lemonade stand or even better, sell cookies, which they helped to make, at your neighborhood garage sale.  Make sure the price points are all single-coins (suggested $0.25).

Middle Schoolers

Math Skills: Put math skills to the test by asking your child to determine if buying a product with a coupon is a better deal than purchasing another brand.  Older children can calculate price per unit and percentage saved.

Allowance, good or bad?:  An allowance can be an effective teaching tool. But giving your kids money for no reason is like teaching them to live off the system.  Teach the same basic budgeting techniques without an allowance:

Clothing budget: Explain in June that your child will be responsible for purchasing their own back-to-school outfit.  Let them know that you’ll be giving them $5 per week all summer and it will be their responsibility to save enough of that money to afford their first-day-of-school look.  This lesson is better for girls. 

Financial choices: Before you purchase your child that game, new pair of shoes or even gift for a friend’s part, STOP.  Instead of just buying the item, why not give you child the money you would have spent.  Explain that they can take that money to purchase the item, purchase a generic or used version of the item, or save up the money for something else.

Carnivals: The annual fair can be a great teaching tool.  Giving your child a $20 in the morning and explaining that it can be used for games, meals or saved , can be a great tool.  This also serves as a great lesson in the detriments of gambling.

Menu Planning: Show your child a weekly sale circular.  Show them how to read it and allow them to help plan one dinner, based on the foods they see are on sale this week.

Continue to build savings goals:  Now that children are older, they are more able to understand the concept of sacrifice and saving in order to get something they want.  Even still, it can be difficult to save, so creating a visual representation, like a simple drawing of a thermometer that they can color as the save more and more is a big help. They’ll be able to track their progress visually.

Prioritize spending: Help children learn the differences between wants, needs and even wishes.  As an adult, my husband and I still disagree sometimes between what is a want and a need, so why not start teaching the principle at a young age! 

Teach them to work: summer jobs: dog-walking, yard work, window washing and pulling weeds build character!  Don’t wait until your kids reach the legal age of employment!  Children can start earning money as soon as they show an interest.  If your child is too young for the above ideas, offer extra chores around the house.  Get kids excited about the rewards of work!

Mistakes happen: Let your children make money mistakes! As difficult as it may be, they will learn valuable lessons.  Wait until the time is right and use the opportunity to teach your child what went wrong and how to avoid the same mistake in the future.

Match Savings: For every dollar your child saves, offer to match their contribution. Teach them to save, but help them too.  This is a great system to start early, and carry on to college tuition and beyond!  Your child will have more respect for the things they own, when they earned part of the item’s cost!

Teenagers:

Savings account:  Teach your children that adults use the bank to save money.  Take them to the bank so they can watch the process of opening an account.  Studies show that children with savings accounts have less stress and more hope for the future.

Checking account:  Teens learn to write checks, balance checkbook and use debit card.  Make sure you have two separate accounts.  Don’t give checkbook or debit card on the savings account!

Learn about credit:  Seniors in high school may be ready for their first credit card.  Prepaid credit cards are a good alternative to regular credit cards for teens and can serve as a type of training wheels to ease young people into using credit wisely.  Low-limit credit cards are another alternative. Parent’s co-sign with their teen on these cards and set a low credit limit of $200 to $300.

Teens can take work-from-home to a new level.  Encourage them to start their own lawn mowing or babysitting service.  Help them organize a family yard sale and let them keep the earnings. 
College savings:  As I mentioned before, I love the idea of matching contributions.  If you are financially able, continue to offer to match your teen’s earnings in their college savings account.

TheKrazyCouponLady was started by young, savvy moms on a mission to slash grocery bills. Visit their website for more great tips and tricks for ways to save money!

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