Teaching your kids how to handle money can be a challenging task. Most parents have the desire and understand the importance of teaching their children money management skills, but find the process very overwhelming. Starting early is the best thing that anyone can do to teach their children about money. Parents should start with the basics and build upon them as the child matures. Start off by creating a guideline for allowances. We recommend a dollar for each year of their age per week. Follow that up with providing each child with 3 envelopes. The first one labeled “Giving”, the second one “Saving,” and the final one “Spending.” Then when you give them their allowance each week, you can explain to them how the envelope system works and how to divide their money up. This way they learn from the beginning the three most important principles of how to handle their money.
Learning how to save can be a hard thing for adults to learn, let alone kids to understand. A real practical way of teaching your kids how to save for big items is to have them draw a picture of the item they are saving for (like a new toy) and then have them colour in the picture according to the proportion of money they have saved. You can then post it beside their chore list. It is like the thermometer idea used when collecting for a fundraiser. This will give them a tangible idea of how their work directly affects their ability to purchase things and acts as a great motivation tool.
Learning these life long principles from the start will help your kids set up a foundation of how to handle their money for the rest of their lives!