Money management is something that children learn from their parents and not at school. This is why you need to know how to teach this important skill to your children. The steps that you need to take will vary depending on the age of your children.
Teaching Young Children
Teaching very young children about money management can be a nightmare because they still do not understand the concept of money. However, they are not too young to learn. To start, you should look at using a clear jar to save money. While a piggy bank seems ideal, they will not actually see the money that they save.
You should also show them that everything costs money. Instead of telling your child that something costs X amount, you should make this into a visual. This could be taking the amount needed from the saving jar and then physically paying the cashier to show them how money works.
Teaching Middle School Children
At this age, children have a better concept of money and will be able to weigh decisions. This is something that you should incorporate into your teaching. If your child wants to buy two items, you will need to tell them that if they buy one they will not have enough for the other. This teaches them to choose what they buy and understand the value of money.
You should also start giving your child a commission instead of an allowance. Commissions can be paid for the chores they do around the house and you should avoid giving your children money because they want it. This helps to teach your children that money is earned and not just provided to them.
You also need to avoid any impulse buys. Children of this age have mastered how to capitalize on impulse buys and you need to avoid this when possible. If they want to buy something, they will need to do this with their own money.
Teaching Your Teenager
Teenagers spend a lot of time online and seeing what other people have. This leads to the comparison trap where they weigh what they have against what others have. This will often result in them wanting what others have and will cause issues with money management.
To overcome this, you should teach them contentment. You should let them know that their car may not be new, but it still does what they need it to. You can also show them how to save money while still getting what other people have.
At this age, you should consider giving your child a bank account. A simple savings account is ideal as it shows their commission and how much they actually have. This will also better prepare them for adulthood where they need to control money that they cannot physically see.
There are a lot of steps that you can take to teach your child money management. Of course, the steps you take should be age appropriate as giving a 4-year-old a bank account would not make as much sense as giving it to a 14-year-old.