3. Don’t freely give them money
One of the parents’ biggest mistakes is offering unlimited funds to their children. Moreover, they sometimes give money for the non-essentials thing. Thus, if parents want to teach children about money, they need to stop doing it.
Ideally, children start getting a weekly allowance when they are around six. Parents can start at a low amount and increase it each year as children get older. Additionally, parents can give extra money if children do something good. For instance, if they offer to help someone to score better in a math test.
Of course, there are no set rules as to how much you should give your children. It mostly depends on the parents’ financial means or what you expect them to be financially responsible for.
Most of the parents do not realize the effect of giving children unlimited funds until much later. These children usually rely on additional funding sources. For instance, the additional fund can be in the form of debt in the form of high-interest credit cards. Those can be costly for their future.
4. Guide them through the budgeting process
The easiest way to teach your kids about budgeting is to budget together. For instance, if they are invited to a birthday party, give them a reasonable budget. Besides, parents should also help them to shop that stays within the price lane.
5. Show them how to put their money to work
Parents can start by transferring their children saving from a piggy bank to a local bank. Tell them that putting the money to the local bank means letting their money work.
Even though the process makes complete sense to an adult, it might be too abstract for some children. Thus, parents need to explain the process to your children, in the simplest way. For instance, parents need to tell how that additional money will continue to generate even more money (compounding).
These are concepts and skills that will help them for life.
6. Encourage them to do good with their money
The easiest way to teach children is by giving example. Parents can start giving an example by donating to charity or a nonprofit organization. it will be good if parents can do it every once in a while. It sets a good example for our kids and discourages behaviors of selfishness and greed.
When the children have saved up enough money, parents can accompany them to review a list of charitable organizations together.
Parents can try those ways from CNBC Make It, to teach children about money in order to help their children to have better financial literacy.
