How to Encourage Money Smart Children

Kids who understand the value of money, and who are taught early how to make smart money decisions, typically grow up to be more financially responsible and savvy adults. But parents often wonder how they can guide their children strategically, without overwhelming them with the sometimes-daunting considerations of money management.
This post will provide some tips and recommendations to help parents encourage money smart children and to nurture a sense of financial responsibility.

Get them involved in shopping

Even when they are toddlers, include your children in the shopping experience so that they can start to make the connection that the things in your home, the things they eat and enjoy, cost money. Many children take for granted that there will be food on the table, clothing in their cupboard and toys in the playroom. But it is important for them to understand that these things are not freely available.

Start talking about money early

Tell family stories about money –
• Vacations you were able to take because you spent months saving
• A raise you received at work because of top performance
• A considerable discount you were able to negotiate
The idea is not to stress out or overwhelm your children, but to start familiarizing them with basic money principles that will guide them down the road.

Don’t bail them out

When your children experience their first money-related mishap, don’t bail them out.
Just don’t.
It may be that they purchased something that turned out to be a bit of a dud. Or they loaned money to a friend and never got repaid. Whatever the circumstance, resist the urge to smooth it over. It is critical that your children understand the implications of their decisions.

Set a good example

Your children are going to notice what you spend, how you spend it, and what your general feelings are towards money. Make sure you are setting the right example.
If you want to instill a sense of fiscal responsibility in your children, don’t make frivolous purchases and then complain that you can’t pay your bills. Show them that you are saving for retirement. Demonstrate how to budget. Show restraint and discipline in your money management and they will follow suit.

Provide commission, not allowance

Kids need to understand that money and hard work are inextricably linked. A weekly or monthly ‘allowance’ should not be an entitlement, but rather payment for work completed. Outline a series of chores that are achievable, but still somewhat challenging, and provide your kids with commission when they meet the expectations. They may moan initially, but they will come to appreciate the compensation.

Manage expectations

It is okay to say no to your children. It is reasonable to explain that you cannot afford (or you are not willing to pay for) certain things. Sending this message, when appropriate, helps your children to manage expectations and to understand that not everything is accessible at their whim. Again, this reinforces the notion that hard work, patience and persistent savings can eventually lead to healthy consumption.

Encourage them to save

Children can start saving very early. And every child should be encouraged to do so. You can do this by modeling the same behavior, but you can also take it a step further by matching savings dollar for dollar or offering other incentives for money saved.
Encouraging smart money management with your children, even very early in their lives, will lead to good habits and fiscal responsibility down the road.

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