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Money Management for Kids

A popular saying states that money can solve all problems. Unfortunately, most people, especially children do not start out in life with the proper money managements skills. However, having the basic skill set early on throughout childhood will enable children to have the capability to better manage their money thus making them more successful in life. Learning financial basics provides the proper stepping stones to be successfully sound in the future. Children also undoubtedly learn by example and through interaction with their parents at a young age will encourage an easier transition into learning money management skills.

Parents should not shy away from discussing their financial methodologies as this encourages children to start an early routine that generally should become second nature from consistent practice. It is also advisable to allow children freedoms to delegate where and how they would like to spend their money as to critique spending habits and management. With time and practice, most children will be able to start a routine which, in time will become second nature.

Children that learn money management techniques generally are more successful with their spending habits. It makes them develop some responsible characters in other areas of life. Children that learn money management tips are also more likely to have good credit history and manage their debts accurately. Effective money management lessons help children easily adapt to the economy and the ever changing instability as well.

Practicing mock life situations such as budgeting for the home, medical expenses, and food costs are a good way of teaching children real life experiences that they will encounter in their adult life. While discussing money issues with them, it would be better to make constructive statements such as “we will not purchase the air conditioner because it is more important to pay for the utilities”. This will help them understand a need factor versus a responsibility. In addition, parents and other money management instructors for kids should not hesitate to explain how money is earned and spent. They should also be taught that taxes are payable on their income. By this, they learn to work hard and be responsible citizens.

To help children appreciate lessons more accurately, it will be wise to open a savings account. This will help them understand how interests work as incentives for savings. More so, an investment program may be an option to teach that there are greater rewards for putting the money into use rather than leaving it idle in a savings account. Children should be educated on basic money terminology such as: loans, credit cards, percentage rates, budget, gross income and net income. Listed below are definitions of basic money terms:

Loan: Borrowed money.

Percentage rate: Amount of interest on a loan (expressed in percentage).

Credit card: An account of borrowed money used to purchase goods and services electronically.

Budget: A plan made to guide expenditures based on actual income.

Gross income: Total amount one has before subtracting expenses such as tax. After the subtractions, the money left is known as net income.

It is very important to teach kids money management as early as possible. Like in most lesson plans, there should be expectations that children will make mistakes. With perseverance, most children can be highly successful with their money management far into adulthood.

For more information on money management for kids, the following resources will help: