Every parent worries about how their kids will manage money regardless of socioeconomic status; no one wants their child to be broke or reckless with their money. Instilling good fiscal habits in your children starts when they are young, so really it is never too early to start teaching your kids how to invest their money, nor can it be too late.
One of the best ways to start teaching children about money is with a weekly allowance. It doesn’t have to be a lot of money; it just needs to have conditions. For example, some kids get a dollar a week for doing all of their chores in elementary school. If they don’t do their chores, they don’t get the dollar. This teaches the importance of doing work in exchange for currency; if you don’t follow through with the task, you don’t get paid. It’s how life works. It also assigns value and meaning to money. When they buy items, especially ones they really want, they see how much things cost and they attach a value to them. If they want to buy something more expensive, they realize that they have to work longer for it.
Part of giving your kids an allowance is also so you can stop buying them toys, clothes, or other extra things that they want but do not need. This will teach them to save their own money for the things they want, and will also teach them patience because if they only get a dollar a week it is probably going to take them awhile to save up for the things they want to buy. As a kid, having this extended period of saving towards a goal teaches how to make smart purchases because they can’t be as spontaneous with my money as they are with finding things they want. If a child buys something on a whim, it means not being able to get something they really wanted right away. This is a lesson that can be quickly learned for children as young as five.
This brings up another important point. Even if your kids are careful about their weekly allowances and do their best to save and make smart purchases, at some point, they will mess up. They will get sidetracked and buy something kind of dumb only to realize later that they don’t have the money for something they really want. When this happens, do not, under any circumstances, bail your child out. Even if they scream and cry and gnash their teeth, do not give them the money they need. Let them tantrum it out and use the experience as a way to teach them a valuable lesson about saving and spending money. Explain to them that they made a bad choice and now they have to deal with the unhappy consequences of that choice. They will be upset, but ultimately learn the importance of staying on track and not spending money on a whim. They will also learn that they have to work for the things they want, and this will hopefully boost their sense of independence. It is a simple way to teach kids the importance of money, the value of items and how to invest it. Though it is a simple technique, that doesn’t mean it won’t be hard for both you and the child. Although, it sure beats making these mistakes later in their years when it really matters.