Personal finance knowledge is lacking in many American families. The reason for that is a lack of teaching of personal finance issues in school and a lack of financial responsibility by parents. In order to change things so the next generation doesn’t make the same financial mistakes that this generation has made, changes need to be made. Consider these tips to begin teaching kids about financial responsibility.
Give your kids an allowance. But rather than giving them money every week, only give them money once a month. By doing that, they will need to learn about budgeting. They will also learn about saving as well, since they’ll need to save money each month in order to have enough to buy something more expensive.
If your kids manage to save their money, rather than spending it, reward them. For example, for every ten dollars they save give them an extra dollar. This will encourage them to save their money since they’ll be earning interest on it.
Don’t Bail Them Out
If your kids blow right through their monthly allowance the first two weeks, do not bail them out. They won’t learn unless they actually suffer the consequences of their bad spending. Hopefully they remember about it next time and they won’t overspend.
Let Them Spend
You can buy their food and school expenses, but hand over the reigns of their entertainment expenses over to them. Let them spend their own money on whatever toy or game they want, if they can afford it.
Reward Good Behavior
If your kids bring home a stellar report card you can reward them financially. Doing extra chores should also bring them extra cash too. This is how they will learn the value of a dollar.
Lead By Example
Kids learn a lot from their parents. You can talk to your kids as much as you want about finances but most of it will go in one ear and out the other. The way to really inject good financial habits into their minds is to lead by example. Show them that you follow the very advice that you give to them.