Roughly 340 million US Citizens are in some level of debt, with total household debt sitting at roughly $14.6 trillion. While there are good types of debt, such as borrowing money to purchase an investment property, 64 million people have been found to be in credit card debt.
It is really important to teach kids the value of money at a very young age. With the number of people having to borrow money through avenues such as payday loans or installment loans increasingly rising, the younger generation need to be shown how to manage money effectively. In this article, we will go over 5 ways you can help your kids learn the value of money to instil financial awareness and understanding within them.
5 Ways to Teach Your Kids How To Successfully Budget
1. Consider Giving Your Children A Weekly Allowance
If you are able to, giving your kids an allowance each week can help them to learn the value of money. This could be as little as $1 a week, but you will need to let them know that once that money is gone, there will be no extra for them until next week. This will mean that your children will begin to understand that they have to think about what they need for that week, and only purchase something if it is absolutely necessary.
2. Teach Kids About Investing
Learning how investing works in regards to interest is a very important lesson for kids to understand. When you give them their allowance each week, tell them that they have the option to put 25% of that each week into an investment pot, and at the end of each month, whatever they have invested, they will get an additional 10% back from it.
For example, let’s say you give your child $1 each week. They would put 25 cents into an investment pot each week and at the end of each month, you could either give them the $1 back they have invested over 4 weeks, or say to them they can leave all the money in, get 10 cents interest and keep it building up over the course of the year. If you did this for a year, they would have $12 saved up and would get $1.20 a month from the bank of mom and dad.
3. Educate Children On The Value Of Money
A lot of parents will hide how much items cost from their kids as they don’t want to discuss any financials with them. However, it’s important when you go shopping for example that you help your child understand how much typical items cost.
If you are giving your kid $2 a week in allowances, you can show them that in relative terms, that may only buy you a packet of apples. If your shopping bill comes to $100, show them your bill, so they can begin to understand the value of money and how important it is to save.
4. Give Your Kids Access To Budgeting Apps
Mobile payments are used by over 2 billion people globally for online or in store purchases each year. While it is great to hand your kid their allowance in cash each week, it may be best to set them up with a pocket money app, that helps them manage money and budget effectively.
One of the most well known apps is called Go Henry, which allows parents to send money to their kids immediately if they need money, set chores and pay your kid once completed, and help your child learn financial independence, which can all be done via their mobile device. Encouraging this behaviour earlier on, will help kids understand the value of money later in life, and hopefully help them avoid having bad credit scores and having to take out regular payday loans.
5. Offer Your Kids Money For Chores
If you want your child to understand the value of money, you may want to also give them the option to make extra money for helping out with certain chores. For example, if they decide to help wash the car or mow the lawn, you could offer them some pocket money in return.
What this will do is instil a good work ethic for your child that if they work for something they get paid more, rather than just giving them an allowance each week which won’t teach them that they need to work to make money later on in life.
Teaching kids to budget effectively is extremely important, and it is a real shame that it’s not taught in schools from an earlier age. Using the right tactics can really help your kids understand the true value of money and stand them in good stead for later on in life.