Here are simple ways to help educate children about personal finance and managing money:
1. As soon as children can count, introduce them to money. Take an active role in providing them with information. Observation and repetition are two important ways children learn.
2. Use Different Envelopes/Jars. You may be familiar with the envelope budgeting system for your own money, but this can also work for children. On either envelopes or jars, have your child draw pictures of what he or she wants. You may also want to help your child understand that some items will take longer than others to save for. For example, the short-term savings container might have a picture of a specific toy, while the long-term container might have a picture of a trip to Disneyland. Teach your child to set aside money for short-term and long-term goals, and have another container or envelope for spending on everyday items.
3. Plant the long-term seed. Help your child avoid short-term vision, in which he or she receives an allowance and immediately spends all of it. Instead of the traditional money jar, set up three jars for allowance – designated for saving, giving and spending. Help your child calculate how much goes in each jar and divide the weekly allowance among the three. Explain the importance of giving some money to others in need and of saving up for something your child really wants.
4. Discuss with your child the importance of giving thoughtfully, really thinking about what that person likes, their hobbies, how they like to spend their time.
5. Have your child open a savings account at a bank and to track their deposits and withdrawals
6. Set a Good Example. One of the best things you can do is let your child see that you save money too. Put money in a jar while your child is watching and tell him or her it’s your savings jar. This will show your child that saving is “normal.” Plus, since most young children want to be like their parents, seeing you do it will provide them with money lessons that further inspire them to save.
7. Show children how to evaluate TV, radio, and print ads for products. Will a product really perform and do what the commercials say? Is a price offered truly a sale price? Are alternative products available that will do a better job, perhaps for less cost, or offer better value? Remind them that if something sounds too good to be true, it usually is.
8. Set a budget for the shopping trip and show your child the importance of avoiding impulse buys.
9. Older children might like to research the prices of items on their list on the internet. This is a great way for them to compare products and prices to determine which is the best value for money.
10. Every moment with your child is a teachable moment: grocery shopping, changing price of gas etc. Talk to them about how supply and demand sets gas prices, for example.