Financial sense begins when we’re young. Often, it’s the habits we learn collecting chewing gum and comic book money that teach us the resolve to save money later for a house or pay down our student loans. When should kids start learning about money? As soon as they are old enough to count it. Starting early can teach kids good financial habits that will help them for the rest of their lives.
How much should a kid get for an allowance?
A good starting point is at half their age, although it can be helpful if there is work incentive involved. Allowance shouldn’t be like a government check. Money is earned through hard work. That’s the way of the world. The sooner a kid learns to work for their extra cash, the sooner they will learn a work ethic that’s compatible with the world’s economy. Just because their basic needs are met doesn’t mean they’re too young to realize that the world isn’t handed out on a silver platter.
When is a kid old enough to have a cell phone?
As soon as they are old enough to contribute money towards the bill. Once again, nothing is for free. Although it may be too much to ask them to pay for the entire bill, they can pay for a portion by mowing lawns or doing odd tasks. If they want a cell phone bad enough, they’ll earn the money to help with part of the bill.
How do you teach a kid to budget?
The best way to learn money sense is to encourage the kid to save money for something they want. A new baseball glove, a shiny bike, and the latest computer game can be powerful incentives to get kids to squirrel away money. You can even have them set up a bank account to become familiar with banking practices, although a piggy bank will work just as well.
Budgeting takes work, but it’s easier when we can understand the reward at the end. When kids save for things they’ve long desired, they can more dramatically see the effects of savings and investment.
Reward Hard Work
If a kid is paid to do chores, it may be helpful to make the rewards relative to the job they are doing. They can understand that some money is easier than others, but hard work pays off in the end. Difficult jobs can be better undertaken when we realize the rewards for doing so. Don’t let it just be a handout. Money isn’t free, although it can help provide freedom. As they understand the incentives in place behind hard work, they’ll be more willing to get the job done.
Keep It Fun
Hey, they’re kids, so it’s best to go easy on the capitalism. Let money be a reward, not a punishment. Let them understand the value of investment and savings by doing something fun with the money. Even though many of the things we spend money on aren’t any fun, it’s often the fun things that make it easier to learn to save money. Let them learn good habits with rewards that make good incentives. They’re learning, so be patient.
Don’t Forget to Give
At the same time, rewards aren’t everything. It’s important to teach them the value of giving too. This can be done by encouraging them to be part of the gift giving at holidays. When they have to buy or make presents, even simple gifts, for Grandpa, Grandma or even other siblings, it can teach them the value of giving as well as earning. It may even be a good idea to encourage them to give to certain charities that interest them, no matter how small or incremental the amount might be. It’s learning the good habits that counts.
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