When it comes to teaching children about saving money, many parents assume that a good talking-to will be enough to set little Vinny or Mary on the path of financial freedom. Children are visual and imaginative so oft times the things that you are doing in your life can lead to them following or rejecting the notion based on whether or not they see you as a hypocrite. Another mistake that I see happen is when a doting parent will cut a child off cold turkey from the allowances and easy money in order to try and teach them financial education when they are already 16-17 years old. I would advise parents to instill a sense of spending moderation, rainy-day fund saving, and goal setting within a child before he/she is old enough to drive.
The following are a number of tips that I know work for raising a checkbook balancing, baby Capitalist and I hope that you will find them useful.
1. Make Them Work For Their Money
When a pre-teen or younger teen begins to ask for money to keep up with his/her peers this is the best time to invoke a bit of entrepreneurial fire in them. It can start from them doing chores for pay from you the parent and then grow into working for the neighbors and/or other trusted people. One of the best ways to make a kid value saving money is to make them work for it rather than just giving it to them.
2. Play Monopoly or Cashflow’s Rat Race With Them
Monopoly is old school but it drives home the lessons that patience, good planning, and a little bit of luck are the ingredients needed to make big deals and win the game. Rich Dad’s Cashflow 101 Rat Race is a game I would recommend in the biggest way because it teaches kids what assets and liabilities are and the importance of managing one’s money to survive through the loss of a job, or a string of bad luck.
I know for a fact that it will be a pain getting a video game addicted kid to sit still through a board game once every 2 weeks but you should really try – even if you have to force them. Make a bigger deal out of it, like real money to be earned if the kid wins, and make sure that you are teaching them the real-world equivalence as they dance their avatar around the board.
3. Buy Your Own Things Kid
Video games are expensive ($60 a pop) and kids love the hell out of them. When you have a child doing chores for money and trying to learn how to do better with saving, you need to extend the lesson to the sacrifice that comes with buying toys. I saw this magic come true when the 15 yr. old in our lives stopped losing her phone and started saving up stacks when she was made to buy her own after she began hustling. Everyone doesn’t have the sense to be careful when spending other people’s money—hell adults don’t even do well with this—so put the check on them. You want it? You buy it.
4. Teach Them How To Keep Track Of Every Single Dollar
Part of the reason why many people suck at money management is because they don’t have any clue as to how much money they have or how much money they have to spend in a month. A child keeping track of every dollar will make it very real in his/her mind when there is a huge deficit and their bottom line is diminished.
Have you had luck with teaching your children about managing and saving money? Please feel free to donate some tips through the comments.See some words or phrases that you don't understand? Check out The Dragon's Lexicon.