Many parents give their children an allowance as a way to help them learn to manage money. Unfortunately, giving children money and saying, “Don’t spend it all,” or “You may want to save some,” is probably not the best way to teach proper money management skills. By following these tips, you’ll prepare your children for a stronger financial future.
Tip #1: Set financial goals.
Work with your children to set both long- and short-term financial goals. Help them figure out what it is they want to do with their money. Then, create a plan to help them accomplish their goals. Write everything down and post the plan in a visible place so they are reminded of it each day.
Tip #2: Teach the value of saving money.
Talk to your children about the importance of saving money for a rainy day. Work with them to save a portion of their allowance each week (maybe 5% or 10%) in their piggy bank or savings account. You may even add a little incentive – tell them that if they save $100, you’ll match that amount as a special bonus for achieving their goals. Over time, they will catch on to the concept of saving and how easy it is.
Tip #3: Open a savings and checking account.
Many financial institutions offer special savings and checking accounts for younger customers, such as BancorpSouth’s Young Savers and Student Checking accounts. These accounts are designed to help them watch their money grow and allow them to gain a better understanding of how they work.
Tip #4: Consider giving to others.
By teaching your children how to give money, you’re giving them an invaluable life lesson. When they are earning their own income, giving money away becomes more meaningful. Let’s say they have an affinity for animals; they can save money to donate to a local animal shelter or buy supplies to help out. You may also work together as a family to earn money for an important cause. As you can imagine, teaching children to give in this way will make them wealthy in more ways than just a higher balance in their savings account.
Tip #5: Let them make mistakes.
As a parent, it’s too easy to step in and make financial decisions for your children. Our advice: Don’t! Let them make their own spending decisions (good or bad). But be sure you don’t alter the consequences. If your teenager chooses to spend money on eating lunch out every day and runs out of gas money at the end of the week, it’s time to find a ride or take the bus. That’s part of the deal.
Teaching your children to work within a budget will pay off down the road. Hold them accountable by reviewing their goals monthly and helping to adjust where needed. As they get older, make them a part of your family budgeting process so they can see the big picture. Money management is a phenomenal way to instill maturity and responsibility in your child.