Strategies to help children learn to save and use money wisely are easy to find from a variety of sources via the Internet, including government agencies and entities dedicated to financial education. Much of the information is available by age group or by topic, and includes fun, interactive family activities that can increase understanding and action. A quick search on topic of “kids and money” provides a wealth of ideas to guide parents through this important subject.
Here are some concepts to help children to become engaged with using money wisely. Help children learn to distinguish between “needs” and “wants.”
Whether the child’s income includes allowance, work or both, the conversation should be about what they spend money on or how they arrive at their spending decision.
Moving beyond the subject of spending choices is a conversation about budgeting and goal setting. Giving youngsters a sense of how the family budget operates may enlighten them. It can be an eye-opener to see just how much money it takes to purchase basic needs such as food, housing and healthcare, learning why the family can't spend money only on entertainment and fun. Help them prioritize their list and develop a spending plan that includes savings, charitable contributions and some spending money, too.
For a fun and engaging planning example, start out by purchasing five different colored piggy banks. Each time the child receives a monetary gift in any form, with an adult’s assistance, they divide the money into the five piggy banks. A formula is agreed upon; for instance, 10 percent into the purple bank for charity (the child gets to decide which organizations), 10 percent into the blue bank for tithing, 10 percent into the clear bank for college, 10 percent in the orange bank for long-term savings and 60 percent in the green bank for spending.
In this scenario, the child learns to budget, paying themselves and helping others first, with plenty of fun money left over. An additional benefit is the fact that the child sharpens their math skills while learning the value of budgeting and planning. Don’t be afraid to discuss these subjects; parents may end up being inspired to implement some new tactics right along with the children.
Suzy Schwartz is a financial advisor with Schwartz Financial Partners, in Dallas. To contact her, call 972-348-6340.