Financial management is a basic skill needed for adults to manage money and plan for the future. Long-term goals cannot usually be accomplished without financial management skills. Teaching children about money management will help them as they grow and mature. Practicing the following money management skills with children will help them become more independent. Many of these activities can be done at home or in school and may be used as stand-alone activities or in conjunction with seeing a financial planner.
Activity 1: Starting a Savings Account
To start a savings account, parents will need to go into their bank or credit union and open an account in the child’s name. The parent should deposit money into the child’s account online and even set up a portion of the allowance or other income to be deposited into that account. Showing children how to manage their savings account will teach them that saving is a lifelong skill, and failure to save can have dire consequences in adulthood.
Activity 2: Develop a Budget with Them
Parents should sit down with their children and budget for things like groceries, entertainment, etc. If parents are willing to give their child an allowance or other income, this is the time to decide how much of that money will be set aside for savings, charity, and spending. When creating the budget with your child, you may want to have some figures from the past few weeks, so they have a good idea of what money goes where. This is also an excellent time to discuss why some things are more important than others and discuss future plans.
Activity 3: Develop a Shopping List Together
Shopping with kids can be fun, especially if they are involved in coming up with the list. Encourage them to come up with the list by thinking about what is needed rather than what could be wanted. This way, they will learn the best way to avoid impulse buying, hence improving their money management skills.
Activity 4: Do Expense Tracking as a Family
This is a great activity, as it can come up with some interesting insights. Use a sheet of paper and divide it into the categories described above. As a family, go through and add up all the expenses spent in each category. This is also a good time for your kids to tell you how they spend their pocket money.
Activity 5: Helping Children Who Want to Earn More Money
Parents need to guide their children by helping them take up jobs that are age-appropriate. This will help children learn the value of money, but do not expect your child to work all the time. Parents should regularly monitor their child’s work hours to learn about responsibility.
Activity 6: Teach Them to Save and Invest
After paying them for the work you gave them, explain the importance of saving and investing their money. Teach them about compound interest, and show them how they can grow their savings in a relatively short period of time.
Activity 7: Give an Allowance or Rewards
Allow your child a monthly allowance once they learn to manage their money well. They can use this allowance or reward to test their financial management skills by paying for items themselves. The allowance should be directly correlated with the child’s age and financial management abilities.