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Parents make an effort to teach their children everything they can, like how to shoot a basketball, how to stay away from strangers and of course right from wrong. So it’s just as important to teach them about another integral aspect of life – money.
“Teaching kids about finance from an early age can have profound effects on the way they view and deal with money for their entire lives,” says Brian Betz, Counsellor at Money Mentors, a not-for-profit credit counselling agency in Alberta, Canada. For kids, money is seen as a fun thing to save – children often save up pennies without realizing their meaning.
“Because they have so much fun just saving things, it’s an opportune time to show your children the value of those pennies or dollars, so they can continue to see personal finance as a fun but important part of life,” says Betz. So how do we teach children what those pennies really mean?
Teaching your children the value of a dollar is an important first step in having them understand finances. By making your children earn their allowance by doing chores around the house they will learn that cash flow is not something easy to obtain, and they will remember that when it comes time so spending it. (And if they don’t you can always remind them!)
Every kid wants to take their hard-earned cash and blow it all on some candy. Teach your child the value of dividing their money by breaking it down into different kinds of goals. What would they like to do with their savings in the long-term (e.g. save for a video game or toy)? How much do they want (or need) to spend of their savings right away? Explain that if they save more money they can reach their long term goals faster. This helps children understand how money can help them reach their goals and the importance of saving to reach those goals.
Explain to your children that things cost money. You don’t have to get into too much detail, but you can talk about how you make a certain amount of income each month and where that money goes. For example, how some is spent on different expenses, and how some of it is saved.
Kids learn best by watching. When you’re doing your budgeting try to involve your kids – show them how you do your budget and even help them do theirs at the same time. By modeling financial management for your children in a fun way they will learn its importance and think of it as an enjoyable (and necessary) part of life.
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