Now that it’s summer again, many of our children will be out and about, playing with their friends, participating in summer camps and sports, and so on. When a child reaches about 12-15 years old, it is not uncommon for them to start earning a little summer spending money via household chores, such as mowing the lawn, or doing laundry. What is uncommon, however, is seeing a child that truly understands how to handle their money.
How to Teach Kids About Money
When it comes to kids and money, the primary obstacle is that most children in their early teens tend to think only in terms of “want” rather than “need.” It’s best that they learn the difference between the two and the importance of taking care of needs as opposed to short-term wants at an earlier age; before they get their first jobs and start having real expenses to worry about.
- Wants vs. Needs – The first step is to teach them the difference between something they want and something they need. When polled by the University of Michigan in 2014, more than half of young children said they spent money on short-term wants such as eating out and buying games or clothes. Encourage your kids to act less impulsively and save for long-term goals rather than satisfying short-term desires. Give them a goal.
- Make a Budget – Budgeting is hard even for adults, but learning how to do it early on in life, before it becomes a desperate necessity, will make it infinitely easier. Sit down with your child and set up a reasonable plan with them. A popular budget for kids is the “50/25/25” plan. Set aside 50 percent of their allowance/earnings for day to day expenses, such as school lunches or other small recurring expenses. Then, set another 25 aside for discretionary purposes; new toys, games, shoes, etc. The last 25 percent should be put into a savings account set up just for your child.
- Be Transparent – Some people learn best by following examples. By being more transparent with your own finances, you may be able to reinforce some of the points you’re trying to teach them by showing how you follow your own advice… or what happens when you don’t. Children, especially our own, are capable of learning just as much from our successes as our mistakes.
If you want to teach your children how to handle money, think about using this summer as a learning opportunity. Just because, it’s summer break doesn’t mean they can’t learn something new.
The Lewisville, TX bankruptcy lawyers with Shuster Law Firm PLLC have many years of experience helping people find the best solutions to their financial troubles.