Jayne Pearl, co-author of Kids, Wealth, and Consequences: Ensuring a Responsible Financial Future for the Next Generation, says that many kids don’t understand how you get money and that it grows on trees. According to a study by the TIAA-CREF Institute and the Global Financial Literacy Excellence Center, the ethnic group that struggles the most with money is the Latinos. This shows the importance of teaching your kids money in an efficient manner. Here are some tips that will help your child to get a grip on finance.
The concept of earning
To get the answer of how and where does money come from, an average 5-year-old child will say “mom and dad”, “the bank”, “rich people”, and some other funny answers like that. Children usually don’t understand that the only way of getting money is by working. You should talk to your child about how people get paid to work. Try to explain the concept of working because it may help he or she learn what earning is. It is not bad if you give your child a job and ‘hire’ him for some extra chores. For example, take out the trash, collect and recycle cans, sell fresh lemonade etc.
Shopping like a pro
Your kid’s room can become a great interpretation of a store. Open their wardrobe, put price tags on their clothes, and give them some money. Then pretend that you two came to buy something. Your child could make a list of the stuff they needs to buy. Find some items that are on sale, let them pick what they want, and then calculate exactly how much money all of that will cost. When you do that, start again, but let them be a cashier now. By doing so your children will practice their math skills. After you get the sense that they understands the concept of buying and selling, give them a short list of items they will buy next time you go to an actual store.
The ‘Bank’ Game
It is absolutely important to make money available to your child. Lori Mackey, the founder of the website Prosperity 4 Kids said: “If they (children) never has access to money, they will never learn how to handle it.
“Try to play ‘bank’ with your child and before that, determine the amount of the allowance. Experts say that 1 dollar per year of age per week should be enough. Issue your child a pretend check when it comes to allowance. Then if he wants to cash the check, he will need to play ‘bank’ with you. Ask him if he maybe wants to leave some cash in the bank so that he could take it in the future or if he wants to take it all now. Basically, follow every step that you would encounter in a real bank. Mackey also said: ” Discuss the reasons she might want to save some. For instance, say, ‘I know you’ve been wanting new gel pens. If you save up for three weeks, you’ll have more than enough to buy the set you want.”
After learning these tips and tricks, you are definitely going to set your children up for a righter future when it comes to handling thei finances. Keep in mind that there are many more ways to educate them, but these prove to be the most effective.