Remember when you were a kid, and you’d ask for something like a new toy or clothing, etc., and one of your parents would respond, “Money doesn’t grow on trees!” I always found that response incredibly irritating as well as vague. Now, as a parent, when the kids ask for something and its either too expensive or unnecessary, I try to use it as a teaching opportunity. Teaching your children the basics about money, when they’re young will affect how they manage money as adults.
My kids are still too young to understand how to add and subtract, but its not too soon to teach them some basic principles. From the time my daughter was three months old, she’s frequently with me when we grocery shop or make a trip to the mall. I think its important to take the kids with us when we shop and show them the importance of staying within a budget. On the weekends when I clip coupons, I try to get her involved, its quality time and a way for her to learn about saving money.
Teach your kids limits when it comes to money. Discipline is key when it comes to both spending and saving
For me, the most important lesson I can teach my children when spending money, is to distinguish between wants and needs. Yes honey, I know you want another stuffed animal, but since you already have more than you can play with, we’re going to spend that money on something you need, like a new pair of shoes.
Another important lesson that kids need to learn while they’re young is how to save money. There are a few different ways we do this in our house: there’s saving money to spend, like setting aside funds for birthday or Christmas gifts and then there’s saving for unexpected expenses like medical bills or car repairs and then finally, there’s the “Do Not Touch unless the Sky is Falling Fund.”
Finally, it’s so important to teach children about giving back. A good rule of thumb, is to teach them to give 10% of their allowance to a charity, save 10% in their emergency fund, put 10% in their savings account or investment fund and allow them to spend 70%. Teaching your children how to manage their finances is one of the most important lessons they’ll learn and a great way for you to invest your time.
Post presented by Genworth Financial