Money is a valuable resource that enables people to live properly on a daily basis. Because of how important it is, it would be wise for parents to teach their children about money: its value, and how to start managing it at an early age. This not only helps children develop good financial habits but also prepares them for the future when they make their own money.
Here are some simple things you can do to help your child understand the value of money.
One of the first steps you can do to instill financial literacy in your child (aside from basic math learned in school) is by giving her an allowance. Physical currency is predominantly used for everyday transactions, especially in school. This means an allowance would be your child’s first foray into the world of money and how to use, allocate, and handle it. Your child will experience for herself how to use it to buy food and drinks, count her change, etc.
It is important to keep your child’s allowance small and appropriate for their age and circumstances. For example, if there are days when your child doesn’t bring a packed lunch to school and must buy food from the canteen, then make sure that she has just enough to buy food and drinks to keep her nourished. Ask her teacher or adviser to accompany her to buy food if your child has no idea how to it on her own.
Once your child is used to having an allowance, another thing you can do is ask her to come up with small financial goals. This introduces the concept of saving money and opportunity cost in a relatively simple way. Children are interested in toys, video games, and even books, so use this as a motivation to encourage them to set a goal to purchase something they like and save for it.
While she might not be able to save for the whole item, you can challenge her to save for at least half of the amount required. Reward her efforts by paying for the other half. As your child gets older, ask her to adjust her goals incrementally until she starts getting used to saving money — a good financial habit that will be important for the future.
To help your child save money, you can give her a piggy bank or a ‘savings jar’. This provides her a receptacle to keep spare change and excess allowance, otherwise, these might be spent impulsively on things like candy and junk food. A savings jar can be a better option because it is usually transparent and gives kids a visual indicator of their savings progress. Piggy banks, on the other hand, are novel and provide the unique experience of having to be smashed in order to access the savings. Either way, your child will benefit from having a place to store her savings in.
Teaching children about money is a great way to help them be more responsible and be more prepared for adulthood. Always establish open communication when it comes to money management so that you can correct any bad habits that your child may have developed. Finally, be a good role model as well, and show your child that you also save, spend, and are responsible with how you handle money.