Teaching kids smart money habits at a young age can benefit them in their adult years. Thus, they’ll know how to budget as they become older and spend their money wisely. These good financial habits can avert excessive debt and increase their personal savings. But raising financially savvy children can prove difficult. Most kids don’t know – or care – about the value of a dollar, and some parents put off financial lessons until their children are approaching their late teens. But why wait this long? The sooner you start teaching your kids about money, the better.
Here are four tips to help your children learn the value of a dollar.
1. Make your child work for his allowance. Rather than routinely give your child a certain amount each week, base his allowance on weekly performance. For example, you might assign various household chores, and for every chore completed to satisfaction, he earns a certain amount. This prepares your child for the real world, in which he’ll have to work to earn a buck.
2. Encourage personal savings. Most children don’t think about saving their money. Instead, they might spend all their allowance money on candy or entertainment. It’s okay for your child to enjoy his money. But at the same time, it pays to teach him about saving. Open a savings account for your child and have him deposit at least 10% of his allowance into this account. Check with online banks and research the best interest rate savings accounts to help grow your child’s money.
3. Give him access to credit. If you have a credit card, add your teenager as an authorized user and allow him to spend a small amount on the credit card each month. Make your teenager responsible for his charges, wherein he pays his share of the credit card bill each month. This approach teaches your child how to manage credit responsibly, and as an authorized user, your child will build a credit history at a young age. And since your child will one day apply for his own credit card account, demonstrate how to compare and find the best credit card offer.
4. Don’t bail him out. Some young people spend their allowance money fast and frivolously, and then approach mom and dad for additional cash. If your child asks for extra money, don’t give in and say “yes.” Teach him patience. Thus, he’ll learn how to better budget his money.
Financial responsibility isn’t taught in school. It’s your responsibility to instill good money habits in your child. Start young and your children will be equipped to make good money decisions with the bank and with themselves when they’re on their own.
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