Teaching kids self-discipline with money is one of the six most important life skills that your discipline should be teaching. Unfortunately, many kids grow up without knowing how to budget, pay bills, or save money. This can lead to teenagers and young adults getting deep into debt and making poor financial decisions.
Teaching kids about money requires discipline. It means making them earn their money and helping them spend it wisely. It also means talking to them about how to make important financial decisions. Kids are never too young to begin learning about saving and spending money.
Allow them to Earn Money
One of the best ways to help kids start learning about money is to let them earn it. Just like most adults go to work to earn their money, children need to learn how to work to earn their money.
Give your kids age-appropriate chores. Assign daily and weekly chores that allow your child to earn money. Also, provide opportunities to earn more money if your child wants to work more.
It’s important not to give your child the money if they don’t earn it. I’ve worked with plenty of parents who say their kids just aren’t motivated to earn money. However, it’s usually because the kids get everything they want all the time, so there is no need for their own money!
Decide what you buy for your child and what you won’t. For example, if your child wants a new video game, don’t just rush out to buy it. Instead, allow your child to purchase it with his own hard earned money and he’ll appreciate it a lot more.
Or if you have a teenager who wants to go to the movies on Friday night, don’t just automatically hand over the money. Instead, make your teenager pay for extra privileges and activities. This helps teens learn how much things cost and can help them begin making decisions about what they want to do with their hard-earned money.
Develop a budgeting plan
Work with child to develop a kid-friendly budget. Most kids need help knowing how much money to save and how much to spend.
A good way to help children learn about money is to teach them that a certain percentage of their money needs to be saved. Consider ten, twenty or thirty percent of their allowance to be saved each week. For small children, separate piggy banks can be a good way to help them divide up their money into saving and spending categories.
For older children, help them open a bank account. Then, they can begin learning about how to deposit and withdraw money. It can also teach them how to earn interest and you can begin having discussions on investing.
Determine what values you want to teach your kids. For many parents, it is important to teach children how to give. Consider encouraging your child to set aside a certain amount of money that will be donated to church, a charity, or used to buy gifts for others.
It is important to teach kids how to set goals for their money. Saving for a car or for a college fund are realistic goals for teenagers. Help younger children save up for a special activity or toy of their choosing.
It can be helpful to show kids how long it takes to earn things. So if your child earns $10 a week, discuss how long it will take to buy that new skateboard. Help kids make good choices about how much to spend on their purchases and discuss how different selections may offer different prices and quality.
Provide Consequences When Necessary
Provide positive and negative consequences for your child’s money management. For example, provide lots of praise and positive reinforcement when children are working hard to stick to a budget. Don’t let their hard work go unnoticed.
Make sure there are negative consequences for mistakes as well. Sometimes it makes sense to allow kids to experience natural consequences. For example, if a child takes $30 with him to the fair and he spends it all within the first few minutes, don’t give him more money. Instead, the consequence is that he won’t be able to have fun spending money the rest of the time.
At other times, it makes sense to take away privileges as a consequence. If you have a child who disobeys, lies, or steals about spending, there needs to be a more serious consequence. For example, don’t allow him to go places with friends or take away electronics.