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Start early
It’s never too early to begin talking about money and saving. By the age of 5 or 6, parents can introduce a small allowance to their children. A simple rule of thumb is to provide a dollar amount equal to their age each week. It’s a great starting point for conversations about saving, spending and giving. And when saving becomes expected at an early age, it’s more likely to become second nature as they grow.
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Teach Wants vs. Needs
Giving children the freedom to choose their purchases with their allowance helps them understand the value of money and differentiate between desire and necessity. Making even the smallest spending decisions helps them learn the worth of each dollar by deciding whether they would rather have immediate gratification, like candy, or save for a more substantial purchase, such as a small toy.
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Encourage Savings, Budgeting, and Goal Setting
Younger children may keep their savings in a piggy bank, while older ones might prefer using a bank account or a debit card. After the saving begins, helping children set up a simple budget lets them learn to allocate their money effectively. Introducing the concept of longer-term goals also gives children a tangible reason to save and teaches them to delay gratification. Budgeting instills the important life skill of living within one’s means.
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Foster Smart Buying Habits
Teaching children to be smart consumers is a crucial aspect of financial education. Comparison shopping, using coupons, and discussing the persuasiveness of advertising can help children understand the value of making informed buying decisions. It’s one of the most important ways parents can empower children to make thoughtful choices and avoid unnecessary expenses.
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Allow Them to Earn Money
As they enter their teenage years, it’s good to encourage kids to take on small jobs, such as babysitting, pet sitting, snow removal, or lawn care. This helps them gain independence and experience making and managing their own money. Parents should help children set up a checking account and teach them to check their balance before making any purchases.
By implementing these strategies, parents can lay a solid foundation for their children’s financial future. Just remember, teaching children about money is an ongoing process that takes time, patience, and consistent communication. But if you put in a little work early on, there’s a good chance it will pay off in the long run, setting them up for a happier and more prosperous tomorrow.
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