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Money Management for Children - Part II

By Andrew Loh



As your children learn more about money management, they will show signs of maturity and responsibility towards money. You may also get to see them treating money as a precious tool of transaction. However, children tend to commit mistakes whenever they are learning new things. See that you are driving home important aspects of money management from time to time so that your children will show a unique attitude about spending and saving. Here are some more useful tips to make your children money smart:

Discuss with your children about the power of money: One of the most important aspect of teaching money management is to tell your children what money is made of and how money helps millions of families all over the world. You should also tell them how people earn money and what they do to save money. You may also wish to inform them how you spend your money every month. Your children should know the mechanism of how money works and in what manner people exchange it for necessary products and services.

Tips: Take your children to a departmental store to show them how people exchange their money for products of their choice. Explain them how people buy products and services and in what manner owners of the shop fix prices for products. You may also need to teach them the basic aspects of shopping and the technique of buying products for cheapest possible prices. For example, let us say that you want to buy a small carton of raisin. You may tell your child that raisin is available for sale at a cheaper price and this is the best time to buy some. Finding and buying cheapest possible products should be the top most priority. However, tell your children that they should remember about the quality of the product as well.

Do what you say: You should do what you say! Lead by a solid example! If you tell something about conserving money, you should do that yourself. Your children will be watching every action and decision that you make or take. Be responsible, so that your children learn that from you. Never indulge in reckless spending in front of your children. If you are planning to buy some premium products, make sure that you are justifying that decision.

Tips: Let us say that you want to buy a costly shirt. Now, you may wish to tell your children that you are buying that shirt for attending an important business meeting. Make sure that you set your priorities right before buying anything.

Establish monthly limits: Never ever, be over indulgent! Set a limit for monthly spending! Your children may ask for a number of things, whose price may over-shoot your monthly budget. If there is a demand for too may a thing, you may wish to tell your children that they can buy those things in the coming months. When you bind your children with a solid perimeter, they tend to restrict themselves to that basic rule. There are too many things that your child would like to buy. However, balancing your income could be very difficult! Your children should know why spending too much in a particular month could make the monthly budget go bad.

Tips: Ask your children to make list of things that they would like to buy for the next few months. Make them attach a priority to each of those items. Let the cost of items be within your monthly budget.

Set monthly allowance: You must set a monthly allowance for spending. Be strict about this important issue and act firmly with this rule. Pay them their allowance once or twice in a month and ask them to be prudent with their money. Children tend to do well when they have their own money with them. In fact, they could even be very careful with their money.

Tips: Make sure that your children save money out of their monthly allowances. Open a bank account in their name and ask them to deposit some money in the bank. The most general rule is to set a limit of $1 per year of age for every week.

Teaching budgeting and spending plans: If you have older children, you can start teaching them the basics of budgeting and spending planning. With this approach, you can easily empower them with the skills and knowledge of using the available money in a judicious manner.

Tips: You can use simple personal financial manager worksheets to create these plans. Make sure that you are emphasizing on the liberty that comes to them when they are writing their plans.

Money management is an essential skill and a big necessity. Financially intelligent children can do a lot with their money. It will also help them to create a financially better and brighter future, when the little savings made by them grows bigger sometime in the future.

Featured Resource

Smart-Money Moves for Kids
By Judith Briles

When it comes to money, every parent needs a game plan. Dr. Judith Briles' Smart Money Moves for Kids is designed for teaching kids from 3 to young adult about the value and use of money. It is laid out in 5 parts: The Game Book for Parent; Kids--From Preschoolers to Preteens; The Teen Years; The Adult Rises; and The Internet. Packed with games, quizzes, the stock market, collecting, buying cars, even planning a wedding, the author makes the money maze easier.

It covers ALL aspects of money management including allowances, saving, spending, and developing the entrepreneurial spirit, getting a job, using credit, leaving the nest and much, much more. Smart Money Moves for Kids is an excellent, and very readable, resource for all parents (and grandparents!) who want their kids to have money savvy.

 

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