When it comes to success and money, children are more likely to follow the path of their parents than they are to go a different course. Children of poor parents will likely remain poor, middle class will stay in a similar income bracket, and rich kids will often raise little rich kids of their own.
Though these trends generally hold true, it?s become more likely in recent years that children will often end up in a worse financial position than their parents were in. This is due not so much to lesser incomes, but simply as a result of increased appending, of which credit cards are certainly to blame.
Teaching children the importance of money at an early age and not to take it for granted can instill good traits in them that will carry on into their adult life. Not doing so may pass on the notion that money in unimportant, or that money matters are overly complicated and to be feared, which could leave them with those same feelings through the rest of their live. These are just some of the ways you can teach them the value of money.
Give Kids an Allowance
An allowance is the best way to give them a first-hand taste of money, and the responsibility and potential that goes along with it. There are different allowance types, and each one can have different effects.
These two main types are the gift and reward systems, and both are used at about equal rates in households that give allowances. Both systems work on a system of having regular and routine payments of the allowance, usually weekly or monthly. This lets the child develop methods to make the money stretch between the allowance periods, knowing that no more money will be forthcoming until the next scheduled date, much like the later paychecks they’ll be receiving.
The gift system is basically an allowance that is paid regardless of any other factors, like the reward system. The reward system on the other hand will often pay out for the child successful completing chores, doing their homework, getting good grades, eating their vegetables, maintaining good hygiene, etc. The reward system certainly has its advantages when it comes to giving children a sense of pride and appreciation for their money, but it may not be suitable for younger children. You may still wish to reward them for good deeds, but this can be done on top of the regular allowance, as opposed to it being a requirement for the entire allowance.
Beyond the allowance, you may want to give your child a more in-depth look at how your personal finances work, and slowly let them in on some of the deeper aspects of financing and the importance of investing and saving. You may wish to learn a little more about investing yourself before going too in-depth on the subject, to make sure your own knowledge is up to snuff. Sharing your own financial successes and failures makes the financial process tangible and relatable to your child, completely different from the black and white numbers they’ll go through in math class and the reality of the findings in credit check.
A good combination of a solid allowance system and some personal guidance and tales should set your child on a good path to financial responsibility. It won?t be an easy road, as there are many siren songs of temptation out there, but you?ll have done your part to shut their ears to such raucous melodies.