Schools do not teach our children much about financial management. It is up to the parents and guardians to teach effective money management techniques to ensure that children grow to be adults who know how to manage their finances. Here are some tips to help you get started:
Piggy Bank: Start simply and gear the methods to your child’s age. Starting when your child is between the ages of three and six is a great time to begin teaching the basics of saving. Children love piggy banks and putting the change into the slot! Whenever your child receives money for holidays and birthdays, or if you decide to give a small allowance to your child, show them how a portion of all money received goes into the piggy bank.
Categories of Money: As your child gets a little older, his or her level of understanding will increase. Somewhere around second or third grade, you can give your child additional piggy banks or envelopes to designate different categories. When they receive their allowance and monetary gifts, you should show them how a percentage of all incoming money goes into each of your categories – for this age group you may start with long term savings, short term savings, donate, and spending. The long term savings are not meant to be used for anything now – you can talk about this money being saved for the child’s college education, downpayment on their first home, or for their retirement years. The short term savings category is meant to help the child save for something he or she wants to buy – a video game, new toy or game for example. The sooner they learn to set money aside to buy something they want, the less likely they will be to swipe a credit card when they get older. Your donate category could be money saved to give your church, or to a charity of your child’s choosing; and the spending category is the money your child gets to spend at the candy store or wherever you decide is appropriate.
Savings Accounts: Whenever you feel your child is ready, you can upgrade your piggy banks or envelopes to a savings account for long term savings at your local bank (or through an internet bank). You can then take the opportunity to show them how interest accumulates on money saved, and helps the money grow.