A four- or five-year-old child may seem too young to grasp the concept of money management, but even at an early age, children waiting in a supermarket checkout line can see that money buys things. Therefore, it is important to begin as early as possible to help your child understand the value of money.
Here are some suggestions for introducing a young child to the world of finances:
- Include your child in financial transactions. If possible, have your child with you when you cash your paycheck, pay bills, and make regular deposits to your savings account. Explain comparison shopping at the grocery store as you choose different cereals and snacks. Include the whole family in decisions about whether to purchase significant items today or put the money away for a summer vacation or trip.
- Give your child an allowance to manage independently. A weekly allowance for necessary expenditures and some discretionary funds can help provide a learning opportunity. However, an allowance should be given with the understanding that certain chores are part of being a contributing member of the family. Remember to also discuss the pros and cons of spending the money in different ways.
- Create opportunities for your child to earn extra cash for special events or personal items. Explain the difference between whims, wants, and needs; give your child regular opportunities to save; and describe how to earn money in the form of interest.
- Demonstrate the importance of giving. It may be difficult to show your child the effects of poverty, but it can help to teach two valuable lessons: the importance of saving and how money can also be used to help others.
Teaching your children the fundamentals of sound money management now may help them build a financially independent future.
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