Monday, November 10, 2008

Financial Lessons for Children

Caregivers are responsible for teaching their children many things. One of which is responsibility with money. In fact, one of the most important things parents can do is teach their children good money-management skills.

Money lessons are not reserved for older children either. This financial education should begin early in childhood so that a child grows up with a firm foundation of information.

Starting financial lessons can be as simple as helping children identify needs and wants. Needs are the necessities in life, such as clothing, shelter and food. Wants are the luxuries that are so often made priorities, and it can be easy to see why children mistake the two.

It's also important to discuss the topic of earning money and saving it. If kids understand that money doesn't grow on the proverbial tree, then they may be more apt to appreciate the items that are given to them.

Allowances, even ones given to children as young as 4 or 5, could be a way to instill lessons on learning about money. Start off with small amounts of money that are earned for doing tasks around the house. Young children like to feel useful. So doing a few chores and earning something for their efforts may bring them joy. Earning money also enables them to spend money on things they may want. But money should also be set aside to reinforce the idea of saving and spending on necessities. Here are some other tips to consider:

* Talk to your children about the family's finances. Some parents view this as taboo. But the sooner you're open and honest about money, the more readily children will see the pluses and minuses of it.

* Open up a bank account in your child's name. A piggy bank may be well and good, but a bank account will teach lessons of compound interest. Plus, children can see the deposits and withdrawals in black and white.

* Don't try to control your child's money when he or she is put in charge of it. Lessons are learned through dong the right and wrong things with money. A child will learn sooner if he or she is allowed to make mistakes or earn success.

* Make learning about money fun. Yes, finances are a serious subject. However, as we know with other things, often a little fun in the lesson makes it easier to grasp.

* Teach your child to be a smart consumer, which includes comparison shopping and avoiding impulse purchases.

CAPTION: Money lessons are more than just getting your child a piggy bank. He or she is more capable of grasping financial topics than you may imagine.


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