How to Teach Wise Money Management to Kids

According to Joline Godfrey in her book "Raising Financially Fit Kids," there are six things to do with money: "count it, earn it, save it, share it, grow it, spend it." If you like the idea of teaching kids how to manage money successfully-here are ways to begin.

Instructions

    • 1

      Start young. Begin teaching the first principal of wise money management by counting coins. Kids learn about money by holding coins, counting coins and recognizing the differences between each one. They can have a great time counting coins and dropping each one in their very own piggy bank. (Be sure to supervise carefully so that toddlers don't put coins in their mouths.)

    • 2

      Present opportunities to earn. All kids need a little jingle in their pocket. That's the purpose of allowance. Allowances can be tied to chores or as some parents prefer, allowances are considered to be a base salary. Whatever allowance system you subscribe to, it's a good idea to include opportunities to earn additional money as well. For example, a surprise bonus rewarding a good attitude, a job well done or special effort being made is a powerful motivator.

    • 3

      Consider not spending. There are many things that we can live without. Just because the neighbors have a new car doesn't mean the family needs one. Just because the neighbors have a flat screen TV doesn't mean the family will suffer without one. Just because the latest cell phone is on the market doesn't mean that the old cell phone should be traded in. Talk about the reasons that your family isn't buying. Overspending is a bad habit that is difficult to break. It's better in the long run if overspending is squelched in the first place.

    • 4

      Emphasize the difference between stuff and happiness. Redefine your definition of what it means to have a happy life. Is a good life buying and managing stuff or is it living modestly and having more free time? Ask kids what makes a happy life.

    • 5

      Promote the joy of saving. Ten-year-old Allyson receives a $5 weekly allowance. Her parents established saving guidelines which Allyson has been following successfully for six months. She saves $1 of her allowance following the principal of paying herself first. She can not withdraw from this savings accounting without her parents' permission. The idea is to add to it for several years or more so that she can see it mount up. She spends half of her allowance as she chooses. That leaves $1.50. Fifty cents is put in a donation jar for buying gifts or giving to a good cause. The remaining $1 is put in a stash fund or an emergency fun for unexpected needs.

    • 6

      Begin a family savings plan. If you haven't been counting your own coins and saving them, there is no better time to begin. Practice what you preach about money and savings. Display a family piggy bank or big glass jar in a prominent place and begin a family savings program. Make your motto: "the family that saves together now, plays together later." Whether you're planning a trip or a special expenditure, saving as a family has benefits.

    • 7

      Practice the art of spending. Deciding how to spend your money and on what is definitely an art worth practicing. Most of us have wasted money. Some folks shop as entertainment. They even convince themselves that buying something they don't need on sale is saving. The art of spending is defining what you need, recognizing the pleasure of buying something very special and then looking for the exact item that fits the bill. The art of shopping is carefully crafted; it's not running out to the mall out of boredom. It's not buying on impulse or a whim.

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