Kids and Money:7 Essential Lessons

I'd be a millionaire if I had a dollar for every time a parent asked me what to tell their children about money.
There are numerous aspects of money management that you can and should discuss with your children.
Here, I'll share with you seven of the most important principles.

1. Money can be used to purchase goods or services.


This is one of the first few lessons you should teach your child once he or she is old enough to understand – usually around the age of three.
Allow your child to hand the money to the cashier the next time you go to the corner store to buy one or two items.
They will gain a better understanding of the concept of being able to exchange money for things they want or need as a result.


2. One should exercise caution when dealing with money.


Some people I know seem to believe that any coins worth less than 50 cents are simply too small to bother with, and will simply throw these smaller coins away when cleaning out their loose change from around the house.
What a squander!
Start a family small coins box to teach your child to be cautious with all denominations of money and to demonstrate how small coins can add up.
Perhaps you could use the money to fund small family outings (such as a trip to the store to get groceries).


3. Cash must be earned.


There are many people in the world today who do not appear to have learned this lesson.
They sit at home and wait for handouts to survive, or they turn to crime to make ends meet.
Take care not to give your child money every time he or she asks for it without expecting anything in return, such as the completion of household chores.


4. Promote a one-third savings, one-third donation, and one-third spending ratio.

This can quite easily be achieved by providing them with 3 piggy banks or moneyboxes – one for spending, one for saving & one for donating.


5. If at all possible, avoid borrowing money.


It is always more difficult to repay borrowed money than it is to save money.
However, some loans, such as home loans, are unavoidable.
A good rule of thumb is that if you can't afford it, you can't afford it!


6. Money isn't your best friend; therefore, don't let it rule your life.


Simply put, try not to become so preoccupied with your finances that you are forced to work 60 to 70 hours per week just to maintain your lifestyle.
If you do, you are allowing money to control your life.
You don't usually require a fancy car (or a car loan) or an overseas vacation (and personal loan).

All of these things are nice, but only if you can afford them easily!


7. Teach them how to budget and live within their financial means.


This is one of the most important skills that your child should have, and one that many people don't seem to understand.
According to recent surveys, many people spend 10% to 20% more than they earn.
They earn enough money to support their lifestyle, but they don't budget it, so they waste large sums of money each week.


They will be off to a great start with these seven lessons, but there are many more money skills that your child will benefit greatly from learning.