Money Management for Children - Part I
By Andrew Loh
Teaching money management to your children should preferably start,
when they are about five years old. Financial experts suggest a
number of methods and techniques that you can use to teach your
children about money and help them develop saving attitude in the
process. Money management is a positive attitude that comes by
disciplined training. Positive money management helps your children
develop very good fiscal habits as well. Money management can start
at an early age because young children tend to learn quicker and
faster. You can also start teaching your children about money
management when they ask you questions about money.
If you want to raise children, who know and understand how to
respect and manage money, you must ensure that you are creating an
ideal situation for them to learn and understand about the basics of
money. You will be the financial advisor for your children, though
in a simple and understandable way. Better and easy to understand
principles and methods, should help you in this regard. You may need
to teach the most basic aspects of money before venturing into
complex parts of money management. There are five basic issues that
dictate the subject of money management. These issues will provide a
launch pad for your children for thinking about money in a positive
These five basic issues are:
Responsible for money: This is perhaps the most critical
parameter for success with money. You should convince your children
to show immense respect for the hard earned money. When you children
learn how to be responsible with money, they will take their first
step towards financial literacy.
Honest with money: Honesty is another critical and important
parameter that helps your children to be true to their heart while
spending money. Honesty is the best policy and it is the only good
policy that your children must inculcate in their life.
Generous with money: You must teach your children how to
share their available resources with other people, especially food
articles and toys. As your children this positive attitude, you can
expect them to participate in a number of community activities.
Gratitude: Your children should be thankful to the God that
they have something to spend unlike a number of other children who
may never find money to spend. Your children should also show a
sense of gratitude towards money.
Self-identity: Your children should never be too much
materialistic! An obsession for materials could lead to reckless
spending later in the life.
There are a number of excellent reasons to teach your children about
money and fiscal management. Make sure that you are starting it as
soon as possible. One thumb rule here is to start teaching your
children when they ask you to buy some things for them. At this age,
your children should be competent enough to learn about money. As
your child becomes older, he or she will also get ready to learn and
master the art of earning and saving.
Tip: Money is too emotional and cajoling!
Money does not stay in one place for long! Money is also meant for
spending. However, reckless and careless spending may lead to
financial disaster. If you want to teach your children about money,
ensure that you are talking openly without any inhibition about the
subject. Some parents make the mistake of telling their children
that they do not have any money to spend! This could be very
dangerous as words like "we cannot afford to buy that thing" are
negative and they can make your children pessimistic in future.
Instead, you can say "What can we do to afford it?". Not only this
is more positive but also encourage the children to think of a way
to solve the money problem rather than succumb to it.
You can teach four basic money management skills your children. You
will need to drive home these basic parameters into the mind of your
child to ascertain that they master those simple principles. You may
wish to repeat these key points continuously so that your children
can remember them for their life.
Earning: This is a very sensitive issue because everyone in
this world has a source of income that comes to him or her as
earning. You may wish to explain your children from where the money
comes from and how you earn money. You may also wish to tell them
about different ways of earning money.
Outcome: Your children will know from where the money is
coming and how hard you are working to earn that money. In all, your
children must know and understand that earning money is actually
Spending: Earning money is very hard, while spending is the
easiest thing! You should teach your children why wasteful and
reckless spending could derail the family economy. Teach them the
major differences between needs and wants. If your children are
younger, provide them the examples of spending for their school
luncheon and spending for a hamburger. You may wish to make your
children solely responsible for their spending. Also, make sure that
their spending never exceeds the money allotted to them. This works
very good for your children who are in the age bracket of 10 and 15.
Outcome: When you teach your children about different
aspects of spending, he or she will become more responsible about
money. Your children will also understand that excessive spending
will run into troubles in the future.
Saving: Money can multiply only when you conserve or save it!
The most important part of money management is learning how to save
money! Your children can create a solid income base, when they
conserve some amount of money for the future. To do this, you should
teach your children about the positive things about saving and its
immense potential for generating lot of income in the future. To
save some money, your children should avoid spending it for some
Outcome: The power of savings can mesmerize your children1
Bring them a piggy-bank to save some cents and dimes. When the piggy
becomes heavier, your children will be so happy that they have lot
of money in their hand! When the piggy bank becomes full, you can
open a bank account for your children to deposit the savings for
future use. Savings has many positive sides and your children will
learn them in double quick time!
Borrowing/Investing: When your children learn about earning, spending
and saving, it is the right time to teach them about borrowing money
from others (banks) and investing. This is perhaps the most difficult part of money
management as borrowing could be infectious for someone, who is not
skilled in saving money. Borrowing also can be double-edge sword. It comes with many negatives
if you borrow money to spend on holiday and household items that you
don't need or afford!
However, borrowing money (from bank) to invest on a good property or
land could be a very great way of investment which could potentially
reap great profit. Teaching children the concept of 'leveraging' by
borrowing money from bank is a good investment skills if one is not
Outcome: When your children learn and understand how borrowing
money from others or bank could leads
to financial liability if the money borrowed is not used for
Continue to read
Money management for children - Part II here.