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There comes a time in each child’s life when they start to want to buy their own things themselves. This might be through the money they have earnt in a part-time job or from their pocket money. You should use this time to teach your children about money. They need to know when to spend and when to save and the importance of using money smartly. With that in mind, here is what you should teach your kids about money.
Teach Them About Spending
You should also teach your children about spending. They need to understand that money is a limited resource and that once it is gone, it is gone. This can be taught having a money pouch on a day out with your child, and as you buy things throughout the day, this will steadily run out of money. At the end of the day, when all the money is gone they can see that there is no more money even if they want to buy more things. Obviously, this is simplified for a very young child and won’t be appropriate for teenagers.
Children need to learn that eventually, they will need to be able to manage their own finances. A good way of teaching this is through setting a set allowance or pocket money and sticking to that figure. If they spend it all, then it is all gone. They need to learn the consequences of their actions and understand that the bank of Mom and Dad won’t always be there to catch them. If they don’t have money, then they might need to do things like take out a small loan if they desperately need money and you don’t necessarily want this to be the case when they grow up.
Teach Them About Saving
You should teach your children the value of saving money as early as possible. The sooner they understand the benefits of saving money for later, the better it will serve them through their lives. This will help them understand that they need to save money in order to purchase expensive items and that it is worth having some money set aside for times when they want it. A good example of this is if your child wants an expensive video games console, then encouraging them to save their pocket money and once they reach a certain amount you will also make a contribution will help them see the value in saving. Another example would be encouraging them to have a savings fund for when they go holiday so that they can enjoy more ice cream, activities and other treats. These are great ways to show your children how important saving can be and the rewards of doing so.
When they get older, this will also apply to understanding how savings accounts work. If they understand that interest means that their money will steadily grow without them needing to touch it and that the more they save, the more money they will have, then they are more likely to have good saving habits in the future. This will help them to save money for a house, education or anything else that they want to save money for. Teaching them that the sooner they start saving, the better is also worth doing.