You’re never too young to learn to manage money and with today’s generation, our entrepreneurs are getting younger and younger. The richest Youtuber made $26 million last year in 2019 at the age of 8 years old!! Do you think his parents are managing that money wisely? I would hope so. Last Monday, during my Girl Scout meeting, one of my Junior Girl Scouts mentioned her friends at school made $13.00 selling a paper toy she’d created for $1.00. Teaching your child how to manage money at an early age will have them grow up to become a financially stable and responsible adult. Here are some of my best ways to teach children to manage money.
Give Them An Allowance
Giving a child an allowance is where they get their first feel of having money. After doing a poll on Instagram, we’ve come to an agreement that a reasonable age to begin giving a child an allowance to teach money management would be between 7-10 years old. On an average, a child receives between $5-$10 weekly, making them roughly $250-$500 a year. At the age of 10, I probably would have felt rich knowing my annual income was almost $500.00.
Before giving them the allowance, come to an agreement on what they must do to earn their allowance. The first rule of managing money, is MAKE THE MONEY. Now I suggest not to just pay you kids to do chores, I personally think a chore is more of a family contribution to the house. Washing the dishes, throwing out the trash, those are normal contributions to the house that should already be done. Make a deal, if they do extra chores or other things outside of their normal chores you’d reward them with maybe an extra dollar. Explain to them how they can get a raise in their allowance, maybe 6 months of consistent work without being told or reminded to get it done. Do you truly want your child to grow up and become a responsible financial adult? Then DO NOT just give them money because they’ve asked for it. Always make them work for it! So then they’ll understand responsibility and that money is earned not given. Unless they hit on the lotto, then that’s a different story but even then they’d still have to put in the work by guessing the correct numbers to win.
Take Them Shopping
It’s likely your child knows your shopping habits from going to the store with you. Now let them into the spending part of your shopping by actively involving them in the purchases. You can start small by having them help pick out maybe paper towels for the house. Once they’ve picked the best paper towel allow them to figure out before they get to the cashier, how much the paper towels are, how much money they have and how much money they should get back as change. This can help them understand the exchange between money and products/service. Depending how young your child is, you may even have to explain to them the break down of each bill FIRST before having them do the math.
Let Them Make Their Own Decisions On How To Spend $20.00
I’ll be honest, growing up I didn’t get a consistent allowance. I didn’t get money at all, I’d just have to tell my mother what I needed and she would get it for me. I said I’d just tell my mother what I needed, not wanted. So that means I wasn’t always getting what I asked for and honestly, I didn’t understand why. So the first time my father mailed me $20 inside my 8th birthday card, I held onto that $20 bill for dear life! I didn’t want to spend it at all. I kept the $20 for about a year before I spent it on buying my little brother some Wendy’s. He ordered small fries with 4 piece chicken nuggets. I ordered a Jr. Bacon Cheese burger, fries and shared a drink with him. I remember, I was 9 yrs old and I chose to share a drink with him because I didn’t want to spend all of my money. That is when I came to the conclusion, I love money!
Back to the point though, children saving money. It could be your money or the money they’ve been saving. Give them the opportunity to spend $20.00 on their own on whatever they’d like without letting them go over budget. Then maybe a week later follow up with them and ask how do they feel about their purchase? Do they still have money? Did they buy a few items with the $20.00 and now they don’t work, was it worth purchasing? What would have happened if they spent the full $20.00 on one item with good quality? Would they think that was worth it? This here is the beginning of understanding the importance of quality over quantity.
Teach Them To Budget & Save
If you decide to give your child an allowance, it’s a must you teach them to budget. Knowing how to budget money is the first step to saving money. You can start with a small allowance, let’s say they want a new video game and the game cost $60.00. You would have to explain to them how much they would have to save to have enough money for the game. Give them options, they can save $5.00 each week out of the $10.00 to be able to still purchase what they’d like during the week or they can save all their money for 6 weeks. Depending how soon they want the game, they can pick up extra duties around the house for extra allowance money, or what we call in the real world “over time pay”. Teaching them to budget and save for something they want helps the child focus more and become more intrigued with saving and budgeting their money to get the video game. Growing up my mother always said kids should enjoy their childhood, I completely agree! I wouldn’t want you to take the joy of being a kid away with financial responsibilities from a child but giving them a little push and an understanding of finance early on will make a major difference when they grow up!
Light Run Down On Credit
Now I have a question for you, it’s never to early to begin learning about money. What age would you consider too young to learn about credit? I think we should begin to teach them in a kid-friendly way no later than 10-11 years old. Of course, I wouldn’t recommend at that age going in depth what is credit exactly but you can explain that NO MONEY IS FREE! Have your child understand that credit is borrowing money and promising to pay it back within a certain time frame. As the child gets older, you continue to teach them the depth of credit. Maybe when they get their first job, you can let them borrow $100.00 and make it their responsibility to pay you back. Just so they can have their first feel of credit.