How to Teach Kids Financial Literacy and Money Management
Get can’t-miss family activities sent to you!
Get the Best Kid-Friendly Activities
Sent to You Weekly!
Dollars don't go far: Understand a want vs. a need.
When a child works, earns an allowance, or is provided money, he can learn quickly that it is easier to spend it then it is to earn it. Here, it's a matter of decision-making. How bad does he want the item? Explain the difference between wants and needs; children who get this point early in life are far better money managers when it comes to making future decisions.
Help your child develop a savings habit.
What a wonderful idea this is. It's pretty exciting when your responsible little girl sees something she wants and actually has the money saved to purchase it. It gives her a sense of empowerment knowing that she accomplished this over a period of time on her own. Having acquired the ability to set money aside for a given item makes it so much easier for a child to do it a second time.
Teach how to spend wisely.
Help your child realize that just because he has money doesn't mean he needs to spend it all in one place at one time. Helping your child learn the appropriate way in which to allocate those dollars is a major accomplishment.
Discuss his various options, and let him reason out with you through conversation the pros and cons of how he spends it. Perhaps he can spend 60 percent of it on items from his wish list, and put the rest of it in the bank. Or invest a small portion of it so it can grow for him (you can guide him through the process and periodically check on the investment) and give 10 percent to charity. You may want to create an account specifically to be used for philanthropic purposes - church, boy scouts, an animal shelter, or a cause close to your family's hearts.
Our society is very good at teaching people how to work for money, but much less emphasis is placed on helping kids to understand how they can make their money work for them. What an amazing lesson this could be.
Dr. Robert Lawson is the author most recently of Dare To Be a Millionaire, and is the proud father of three sons. His writing has appeared in USA Today and Black Enterprise.
Also see: How to Prepare Financially for Another Child
How to Open Up Financial Communication in Your Family