Sunday, January 3, 2010

Value of money - teach your child

Who among us would like to see their children grow up to be financially responsible? Every parent does. We all desire to see out children become financially independent someday in adulthood, able to provide for their own families and secure their future. Learning to be financially responsible does not happen overnight. It best to start while your children are still young, with something as simple as taking them to a bank to open their own savings account.... Here are some tips:

>Talk about what money is for. Small kids may think that money grows on trees or comes out of the ATM or wallet and is for buying candies. Discuss with your kids that money is for buying the family need and if there is some more left for the family want. Tell them that money is earned parents work so they can earn money. No work, no money. No money no food and toys.

>Pay for needs first. Since money is hard to earn, families should prioritize paying for their needs first. These include food, clothing, tuition fees, transfortation, rent or mortgage, electricity and the like. Tell your children this is why a budget is necesary, so that needs may be prioritized and met. As for wants - those that can wait, such as a new game console think twice about getting them and only buy them if you can afford to.

>Encouraging Saving. Children can be taught to save even if they are still young. First, tell them why it is important to save to have some funds in the future when you need them. Second, give them a coin bank where they can put some money away. Third, open a bank account for them so their savings can grow. For bigger kids transfer some of their money to higher yielding investments as savings accounts give only minimal interest.

>Give allowance. Since people learn more by application than by studying the theory, allow your children to learn money matters the practical way by giving them an allowance. Kids in the upper preschool years can be given 10 or 20 once a week or so, with which they can buy something in school during recess. You can increase the amount in grade school. The purpose of the allowance is to teach kids that they can use their money in two ways; save or spend. And they will find out that if they save they will have more money tomorrow. By spending, they will also learn to choose items carefully. The more expensive item will use up more of their money, leaving them with less. And if they choose the cheaper item they will have more money left.

>Model good behavior. Children looks up to you and watch what you do. Practice good money habits yourself by saving not overspending by paying your bills on time and buying wisely so they can imbibe these habits too. As they grow, they will bring these good money habits with them.......