How To Teach Your Child Money Management Skills

Money management and financial literacy are crucial life skills for everyone, even young children can also learn about them. You, as a parent, play a big role to inculcate these important skills in your child. Earning, saving, spending, borrowing, and repaying money; money management includes all these terms and you need financial literacy to manage your money well. When you manage your money in a way that helps you achieve your financial goals in life that are financial literacy. Every child should learn some valuable lessons about money management and finance.  Here are some tips you can use to teach your child about money management and financial literacy according to their age.

Introduce money early

You can introduce basic money management skills like what money looks like or where the money comes from, to your younger children by talking, role-modelling, and playing. Tell them about the physical money and digital money. Explain to your child where you get your money and so on. Explain to them that money is spent on our needs and wants. When the children are big enough to understand the difference between needs and wants, they can also learn about basic budgeting and saving.

Make a shopping list together.

When you want to make them understand the differences between needs and wants, get them to look at a shopping catalogue and accentuate those things which are needs for your family and which ones want for you. When your children grow older, tell them to make a list of their own needs and wants or you can make a supermarket shopping list along with them and discuss with them which things are needs and which are wants. It will help your child learn money management by watching how you use money in your daily life. Your child gets influenced by your attitude towards spending and saving money.

Let the children make small financial decisions

You cannot expect your children to make big financial decisions on their own until they can make small financial decisions for themselves. For example, when you go shopping, give them the freedom to choose and decide what they should buy and why. If they manage to shop within a certain limit, praise them. This will help them to focus on shopping with an understanding of the value of money instead of overspending. As the child grows, try to involve them in making possible financial decisions. This will make them financially responsible and confident. When you go shopping with them, show them the price of items so that they will be able to familiarize themselves with the cost of certain items and different brands.

Budgeting and saving

If you want your children to learn to use money wisely, explain to them about budgeting so that they can learn how much money should spend on their needs and how much on their wants. Tell them to put aside some money for savings and emergencies. Similarly, teach them how to invest and also tell them how it can help save money in the long run.

You can bring piggy banks or jars for your children and ask them to label them with spend and save. Embolden your child to make decisions on their own about where they put their money. Explain to them how their money grows when they don’t spend and shrinks when they don’t save.  Teach them about money safety also because keeping money safe is an essential part of money management. You could explain to them how to look after their piggy bank or jars so that they don’t lose them.  When the children grow, you could also tell them about the safety precautions for digital money like PINs, passwords and so on.

Along with saving, moderation is also necessary.

Along with saving, it is also important to have patience. In such a situation, if you are teaching the child to save, then also explain to him that children need to have some patience. Just as a jug fills drop by drop, in the same way, with little money, one day more money will be collected and children can spend that money as per their choice. In such a situation, children will learn the lesson of being patient and also they will be amazed to watch that their money is growing.

Make them learn the value of money

When children start to become aware of money, tell them where it comes from. Many children think that money comes from the pocket of their parents. They don’t realize that money has been earned through hard work and we can’t waste it on unnecessary expenditures. Tell them that money does not grow on trees and we should be very careful while spending it. A monthly allowance or pocket money is a great way of teaching children the value of money. If they run out of money during a month, don’t give them more money. They need to learn that once it went….it’s gone.

Play money games with them

It’s a wonderful idea to teach your children about the basics of money management through real-life games because many young children love to play real-life games like monopoly or shopping games. In shopping games, you can give them a certain amount of money and ask them to select items which they believe they could buy for this much money. This will help to familiarize them with the value of certain items.

Explain the basics of banking

Banking can be the first step in connecting children to personal finance. When your child has a grasp on the value of money and the importance of saving, explain to them how adults use banks to store their money and save. Most banks are offering savings account facilities for children. Open a bank account in your child’s name where they can deposit their money. Embolden them to review their account and watch their savings grow. So that children will learn to keep money in their bank account, use a debit card, and use other banking features too.

Though it is important to teach money lessons to children, don't put too much pressure on them and try to make it an interesting lesson. Maintain the right balance. While teaching the lessons related to money, also tell them the importance of family, relationships and humanity. If you have found this article helpful, tell us in the comment section.

 I have written several articles on child-parent relationship. if you like to read them click here:

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