Teaching Money Management at an Early Age

America is in Debt. Yes, incomes have risen over the years, but credit card debt has grown much quicker. We are used to buying what we want, when we want it. Perhaps the beginning of the problem stemmed from childhood. Many children are never taught money management skills from their parents. Many kids don't have a clear understanding of what it means to have money, have debt, and to pay interest. Learning that money has it's limits at an early age is something I would like to incorporate into my children's lives. Beginning an allowance program is a great way to begin teaching children about money management.

Begin Young
Very young children can begin learning the concept of saving money and spending money. As early as kindergarten and first grade, small amounts of money are completely acceptable for an allowance. The earlier you begin teaching money management, the quicker it will become a routine in their young lives.

Set Ground Rules
Before you begin giving your children an allowance, make sure they understand the ground rules. Sit down with them and discuss how much money they will be getting and where it will go. For example, If you give a 6 year old 3 dollars a week, let him/her know that you would like $1 to go towards charity, $1 to go into savings, and $1 is free to spend as he/she would like. Be sure they see all three dollars before putting them into different "funds" each week. It lets them see their money and where it is going. Be sure to keep them involved in the decision making. For instance, let your child decide which charity to donate to, or what he/she would like to spend his/her own money buying. The more involved you make them, the more excited they will become.

Early Payday
One tip for beginning an allowance is to make the payday early in the week. This teaches the child to save his/her money and think about what they want to spend it on throughout the week. If you give them their allowance on the weekend, it will be gone right away. Money management and money willpower will be created by distributing allowance on a Monday or Tuesday.

Base Pay
Always give your child a base pay amount. Don't use the money management lesson as a tool to get your child to do more chores around the house. If you use money as a reward, it is usually spent immediately. However, if you always give them a set amount of money, money management begins to take form. If you would like, implement an awards program separate from the base pay. If your child is working towards saving for a particular toy or video game, give him/her the opportunity to do chores and earn a little extra. However, never substitute the base pay for award money.

If you effectively teach your child money management skills early in life, they will have success. Money management is one of the most important lessons a parent can teach a child. Give your child a extra boost and begin an allowance money management program.