Teaching kids to save money is no easy task. You can start by helping your child to understand the value of money and to save it can help to position them for a more successful life. As a foundation, Investopedia.com shares, you can help them to understand money’s value by teaching kids the difference between wants and needs.
Needs, you can explain, including food and shelter along with basic (not a designer) clothing. Other important needs are paying for the doctor and dentist and education costs. Wants, on the other hand, are life’s enjoyable extras: fancier clothing, candy, movie tickets, and so forth. As you walk through your home, you can ask them what each item is: a need or a want.
When a child is in preschool or kindergarten and wants a certain item from a store, find out the price. Then physically remove that amount of money from the clear jar so that they can see how much of their saved-up money will go towards that item.
If your child has reached elementary school, they’ll understand numbers more fully. So, it’s time to demonstrate “opportunity cost.” If they want a video game, for example, and they know they have enough money, discuss what they won’t have money to buy—perhaps an in-demand brand of shoes. Let them weigh the pros and cons of what to do with their money.
There’s a lot of debate on the topic of allowance, and Ramsay suggests that, instead, you give your children “commissions.” This money will be based on what chores your children complete, teaching the idea that money must be earned. Here’s more information on the pros and cons of allowances.
Saving money—for kids and adults alike—can seem more logical when you have a goal for saving those funds. This teaches the all-important lesson of delayed gratification. According to NerdWallet, this can help children say no to impulse spending because they know why they’re saving.
The notion of impulse buying brings up another crucial point: when teaching kids to save money, you should also teach