Prevent Your Children From Living Paycheck to Paycheck!

Money management for kids should not be ignored. Eventually all children need to learn how to manage their finances or be relegated to living paycheck to paycheck with no retirement savings.

Parents would like to have children who work hard in school, make good choices, and learn to manage their money. These things do not magically happen. It is a process that takes years even if it is started at an early age.

Parents who wait until teenage years to attempt to instill a good work ethic and money management skills will have their message fall on deaf ears. There are "teachable moments" throughout a child's life. Don't miss them.

Beware!  Your Children Are Watching!

Your children are watching and learning by the examples you set. They are likely to copy your example. Remember, you are their hero during those formative and habit-shaping years.

Share your financial successes and failures with your children. They will, in time, face similar tests. Perhaps the failures can be avoided.

Teach them the difference between "needs" and "wants". We need food, water, and shelter - for example. Nobody needs a new tricycle or a skateboard. Make a two column list of "needs" and "wants". Explain why each item is in each column.

Parents are the lead teachers for their kids. Your children will respond to intelligent conversations about money. They want to learn. Don't keep them isolated from terms such as: mortgage, loans, compound interest, paychecks, and taxes.

Interesting Ways To Teach Money Management for Kids!

Children are eager to learn how money works, since it already is a big part of their lives. As soon as my daughters were able to count the change in my pocket, I challenged them to come up with the correct total. If they were correct, they kept it.

I was taught at an early age that money should be kept in an orderly manner. As a result, I always arranged the bills in my wallet by denomination in ascending order.

Occasionally, I would suggest that my daughters to ask to check my wallet. They eventually quit checking as the bills were always in order. So, I intentionally turned a one dollar bill upside down or backwards. They knew that they'd get to keep anything out of order. As the girls got older, I would occasionally (and intentionally) misfile a $10 or $20 bill.

I also was able to teach them which president was pictured on each denomination by telling them if they got the right answer, they'd get the money. The largest bill that was earned had a picture of President Grant on it.

Begging and Borrowing!

Occasionally one of my daughters really, really wanted to buy something. If they did not have enough spendable cash to make the purchase, I would advance them additional allowance (for a price). If there allowance was $10, for example, I would tell them that I would advance them only $9. The one dollar deduction was my advancement fee.

The result, on several occasions, was to "delay gratification" to insure getting the full $10 allowance. There were times when the need to purchase the item waned and it was never purchased. Delaying a purchase has become a routine procedure and a great money saver.

Saving Money or At Least Not Spending It Is a Good Thing!

I can remember my mother frequently telling me: "Any damn fool can spend money." She was right, of course. Buying something that one wants makes an individual feel good. And the store clerks are always accommodating and helpful. (That is their job.)

The key to successful parenting is to create a balance between spending and saving. That is where the three category saving plan will work. Use jars or transparent piggy banks. So, the money can be easily seen. The categories are:

  • Cash (for immediate use)
  • Cash (for mid-range future items)
  • Cash (for long-term goals such as a college fund)

Some people insist that there must be a 4th category for donations. The most important thing, however, is that the child must be aware that there are separate and definable categories if they are going to do long-term planning.

You could match their long-term savings as a way to finance their college education. If you have several children close in age, you could have a savings contest. The "tightwad" and "spender" personalities will emerge - if you didn't know already.

There Are Daily Teachable Moments!

Have your high school student pay your bills for a month. They can write each check and do all the things that you would do. Two things will happen. First, they will realize how much money it takes to run a household. And second, they will get some experience doing what they will be doing in the future. If you pay your bills online, they can do that.

If you have a home mortgage, explain it to them. Include the decisions that you needed to make. Another way to teach economics is to explain why you bought a car that you could afford rather than buying a new car and financing it.

Have your children work the aisles at the grocery store looking for better values. If you use your computer to buy things online, encourage your children to find a better deal. Split the savings with them.


See Money Management for Kids Two for more ideas.

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