Moneymanagement’s Weblog

Teaching your kid money management

Posted in small savings by moneymanagement on July 30, 2008

Most of us are well aware of the importance of creating budgets and plans for our personal finances. However, sometimes we forget that we also need to pass on this essential knowledge our children about planning and budgeting.

Saving

You have to give your child the power to decide how much to save and how much to spend. By giving your child this power, you will also confer the responsibility and excitement that comes with making adult decisions. You can make suggestions and prepare some example plans, but the final choice should be left to your child.

By giving your child a choice of how much to save, you bypass the question of whether or not to save. The goal of this exercise is to teach your child to make saving a habit. Help him save by starting a bank account and encourage him to save extra by adding a matching amount he saves each time.

Spending
You should not interfere in how your child uses his or her spending money. Don’t interfere with your child’s spending habits other than to point out that once it’s gone it’s gone – you won’t provide more money if your child spends his or her own too quickly. It’s a difficult lesson, but children will do better if they learn it early.

Get Organized
On the same day as you open the account, go shopping with your child and select a binder, a congratulatory present. You will use this to organize your child’s bank statements. Starting out with an organized record-keeping system will be valuable when your child gets older and has to grapple with taxes and accounting.

When the statements arrive, go through them together and explain the interest and any other numbers that may appear upon it.  On the same day as you regularly pay out your child’s allowance, go together to make the deposit at the bank. This will help to reinforce the habit of saving before spending.

So go ahead and give your child habits that will last him a lifetime.

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: