Introducing kids to money

Money gives people decision-making opportunities. Educating, motivating, and empowering children to become regular savers and investors will enable them to keep more of the money they will earn and do more with the money they spend. Everyday spending decisions can have a far more negative impact on children's financial futures than any investment decisions they may ever make. 

Here are some simple ways to help educate children about personal finance and managing money:

• As soon as children can count, introduce them to money. Take an active role in providing them with information. Observation and repetition are two important ways children learn.
• Communicate with children as they grow about your values concerning money --- how to save it, how to make it grow, and most importantly, how to spend it wisely.
• Help children learn the differences between needs, wants, and wishes. This will prepare them for making good spending decisions in the future.
• Setting goals is fundamental to learning the value of money and saving. Young or old, people rarely reach goals they haven't set. Nearly every toy or other item children ask their parents to buy them can become the object of a goal-setting session. Such goal-setting helps children learn to become responsible for themselves.
• Introduce children to the value of saving versus spending. Explain and demonstrate the concept of earning interest income on savings. Consider paying interest on money children save at home; children can help calculate the interest and see how fast money accumulates through the power of compound interest. Later on, they also will realise that the quickest way to a good credit rating is a history of regular, successful savings. Some parents even offer to match what children save on their own.
• When giving children an allowance, give them the money in denominations that encourage saving. If the amount is $5, give them 5 1-dollar coins and encourage that at least one dollar be set aside in savings.
• Keeping good records of money saved, invested, or spent is another important skill young people must learn. To make it easy, use 12 envelopes, 1 for each month, with a larger envelope to hold all the envelopes for the year. Establish this system for each child. Encourage children to place receipts from all purchases in the envelopes and keep notes on what they do with their money.
• Use regular shopping trips as opportunities to teach children the value of money. Spending smarter at the grocery store (using coupons, shopping sales, comparing unit prices) can save money. Demonstrate how to plan economical meals, avoid waste, and use leftovers efficiently. Show them how to check for value, quality, warranty, and other consumer concerns. Spending money can be fun and very productive when spending is well-planned.