Learn these six steps to teach children about money
Choosing Age-Appropriate Lessons for Children
Before discussing money with your kids, it’s important to consider their ages. If they are young, they may not understand abstract financial concepts. However, you can explain that you need money to buy things and that you earn this money through work.
When your kids reach school age, you can show them how daily habits play a role in how money is earned, saved, and used. At this stage, encourage them to work for money through an allowance or chores for the family or others. Help them develop the habit of saving their money.
As teenagers start making their own financial decisions, your guidance plays a crucial role. At this time, it makes sense to discuss more complex topics such as taxes and other paycheck deductions. You may also want to emphasize the importance of an emergency fund, as well as planning for short-term and long-term financial goals.
Setting a Good Example with Your Spending and Saving
“Children learn more from seeing than from hearing,” said Charles Thomas III, a certified financial planner (CFP) and founder of Intrepid Eagle Finance, in an email to The Balance. For example, if you are quietly shopping for a good price on your phone, your son or daughter may find it difficult to grasp the concept of price comparison. However, if you take them on a trip to the store and compare items while explaining what you are doing, they will be more engaged and likely to absorb your lesson.
And since “children see and absorb everything you do and say, make sure you are spending responsibly and discussing money in positive ways,” said Andrea Woroch, a nationally recognized family finance expert, in an email to The Balance.
Opening Savings and Investment Accounts with Your Child
There are many accounts you can open for your children. Some of the most common accounts include checking or savings accounts designed for kids at banks. For investment, you can consider UTMA (Uniform Transfers to Minors Act) accounts or UGMA (Uniform Gifts to Minors Act) accounts, as well as Roth IRAs designed for kids at brokerage firms.
Checking and savings accounts designed for kids can help them learn the value of saving and managing money effectively. Encourage your child to make regular deposits into their savings account and watch their balance grow.
Source: https://www.thebalancemoney.com/top-ways-to-teach-kids-about-money-2085626
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