Five ways to teach your kid about managing money

One of the most important and useful skills in our life is a skill to save money and increase savings. The money management skills, just as the language skills, are better acquired in childhood, building a habit that will pay off in future. Parents play a very important role in teaching children about money management – the skill that will ensure their financial stability during the whole life.

“The modern ways of teaching children about money differs from those we used in past – nowadays cash is used rarely, payments are mostly made online. However, I would like to encourage parents to speak with their children about the financial planning and certain moments of life when you need to spin money out. It will let your children understand the money affairs in your family. To support positive changes in money handling, parents can help their kids with getting the idea of responsible money management. By virtue of small daily activities, we can let our kids plan their purchases, help them save or earn money for the desired aims”, emphasizes Kerli Gabrilovica, Head of Luminor Latvia.
 
There is a number of sources created for teachers teaching financial literacy at schools, but it is not taught as a separate subject. That is why parents can provide their kids with the most important basis in acquiring money management skills since their childhood – starting with a pretend playing shop with your child and teaching him money counting, and later supporting him in the money saving process and involving him in the planning of the family budget. Luminor has summarized five tips for parents in teaching their kids about money.
 
1. Money saving to buy a desired item or a toy.

Sometimes our daily expenses may include some bigger purchase, and we need to save money for it. Saving money is not easy, no matter what your age is. Therefore, it is good to learn and form the habit of saving money in the childhood. When your child wants a new toy, you can help him make a plan of saving money for this purchase. For example, by putting aside a certain amount from his pocket money or by being paid for certain tasks.
 
2. Pocket money budgeting

Recurring pocket money is the excellent possibility for a child to understand the value of money and to learn saving money. Even if your kid spends money very quickly and fails to save some money for the planned purchase, it will also be a lesson – he will be more prudent in managing his money next week or next month. You can also help your kid with making a journal of his incomes and expenses, where he will record all his spendings. You can discuss the entries at the end of month and find additional ways of saving money for the desired aim.
Nowadays there is also a number of mobile applications for teaching children budget planning and saving skills. For example, FamZoo, which allows a kid to manage his jobs, incomes and other activities. Another simple app is Bankaroo – some kind of the first virtual bank for your kid, helping him to learn saving money for the set goals and to plan his budget. PiggyBot is a virtual “piggy bank”, allowing children to control their expenses and savings.
 
3. Inspiring to earn

Many children are naturally rich of imagination and entrepreneurship, and you can develop these qualities. Parents can inspire children to create their own ways of earning money. For example, kids can sell wild berries in summer (parents can help them by making arrangements with neighbours who would be ready to buy), participate in fairs with their handmade items, trim grass on the neighbour’s lawn or walk their dog. It is important to let the kid arrange and manage his work himself, but parents can help him or give advice if necessary.
 
4. Letting them pay themselves

Children are happy when parents give them some important tasks. For example, to buy some bread or to pay for their ice cream themselves. The kid will have to understand how much money he has and what he can buy for it, and then he will have to pay at the cash register and get change from the cashier. If you have a younger child, you can pretend playing shopping at home to avoid confusion in a real shop.
 
5. Being a good example

Parents must consider if they are able to set and stick to long-term saving plans, invest in future in order to be a good example for their kids. The most important thing is to speak about it. When your family defines financial goals together and tries to achieve them as a family, every family member will be a winner. For example, you can discuss your monthly budget with your family, share your experience with planned savings and find the ways that will help your family stick to your savings plan next month.

For more information please contact Inese Kronberga