How can I Teach Children About Money?

All parents want their children to grow up to be successful and have what they need. Although money cannot buy happiness, responsible use of money can help ensure that your children will have what they need later in life. Teaching them about money and how to deal with it in a responsible manner from a young age is the best way to prepare them for financial success in their future.

The most important thing to think about if you're going to teach children about money is that they are going to imitate you. No matter what you tell them, children tend to follow your actions instead of your words. If you talk about how important it is to save money but spend every penny that you earn, children will see the discrepancy.

Another way to teach children about money is to start giving allowances from a young age. Allowances can help children learn to save, as well as learning the value of money. An allowance can also help your children set goals. It may seem like quite a sacrifice to put off buying candy or a small toy one week, but if you sit down with your child and figure out how long it would take to save up for something that he or she really wants, it may start them on a lifetime of saving.

Starting a joint savings account will also help you teach children about money. Open a savings account with each of your children and explain interest to them so that they understand the benefits of using their account. It might also be a good idea to start a matching funds program. If your child deposits $5 US Dollars, you deposit the same amount.

Budgeting is hard, even for many adults. Depending upon their age, budgeting can be another good way to teach children about money. Younger children could be taught just to keep track of what they spend. Older children could be put in charge of certain expenses, and learn to spend their money wisely.

Credit card debt is a problem for more and more young people. One way to teach children about money is to recreate the terms of credit cards. If your child has something that he or she really wants to purchase, offer to lend money, but explain the terms. Explain how long he or she has to pay the money back before you charge interest. Then explain how much the interest on the loan will turn into. There is a good chance that your children will be turned off to loans for anything that isn't an absolute necessity!