Teaching Your Kids Money Management

Millions of people in the United States struggle each day with their finances. Countless Americans have filed bankruptcy at least one time in their lives. The truth is most families struggle to make ends meet and are living paycheck to paycheck. This is even true for the upper class. As a parent, we want what is best for our children and we want to prepare them for the world ahead. Teaching them how to handle their finances now, may put them on the right track for the future.

Teaching your children how to handles their money should start long before the teen years hit. As a toddler, most children know what money is. They understand it takes money to ride the horses at Wal-Mart or to buy that new doll on TV; sometimes they may even tell you to whip out that credit card. What they don't understand is where the money comes from and how much it takes to buy what they want.

By the time your child is in kindergarten they have a better understanding of money and are learning the math skill needed to manage it. This is the time to introduce them to the basic concepts of earning and spending. Even at five years old a child can grasp the idea of saving money to buy something bigger.

There are several different opinions regarding allowances. Many parents are against them; the old adage goes "they are part of this family and they shouldn't be paid to do chores". The truth is an allowance is a child's paycheck. It does not have to be attached to chores; it doesn't have to be attached to anything. If they can manage an allowance they will manage their paychecks in the future. An allowance is just another way to help develop your child into a responsible adult.

Once they get an allowance, all other money to them must be cut off. Therefore, the allowance must be in direct correlation to the age of your child. As a parent, you must provide the basic needs for you kids, food, clothing, and shelter. But, all the additional "wants" or "must-haves" comes out of their allowance. This includes toys, games, school trips, movies, activities, and even those expensive clothes that you don't want to buy. By doing this, you are making your child manage their money while at the same time saving money yourself. There will no longer be a trickle of funds leaving your wallet for small things.

Teach your child to save their money. Granted, as a teenager, there isn't much to save for except bigger toys. But, find something they really want and help them save for it. Make you child find out the cost of whatever it is they will save for. They can't save all their money, but they should be trained to save a portion of it. Set that portion and make them save it each week. When they reach their goal, go shopping to buy it; at the same time find something new to save for. Set the standard that saving is a priority and must be done first, before all other bills are paid. This will be a valuable lesson in the long run.

Just like all other parenting techniques, teaching your child how to manage their money can be difficult. It is hard to stick to you guns and say no when they ask for a few extra bucks or an advance on their allowance. Remember, you are doing it for their own good. Don't allow them to end up like millions of Americans who are bankrupt or have bad credit.