Out of all the things that you can do with money, there are four important lessons that you can teach kids - money skills that will last a lifetime.
1. How To Make Money
It's important to teach your children that money simply does not appear out of nowhere. For the most part, making money is the result of trading your time for money.
At the very least they should understand why you go away every morning and come back in the evening. It’s also good to help them understand that you are trading your time for money, as such money is a limited resource.Wouldn’t it be nice if one day your child say to you that he’s willing to give up his allowance so that he could spend more time with you?
2. How To Spend Money
Once they know how money is made, they need to be able to make wise financial decision when they are spending it. I think an envelope system where you split money into “save” versus “spend” pile is too limited. Children need to determine for themselves how to divide the money.
Spending money is a fairly complex topic and it can be divided into three phases:
Phase 1 - Spending Based On Limited Resource. Phase 3 - Spending Based On Needs And Wants. |
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3. How To Save Money
It’s inevitable that your children will want to spend more than their weekly allowance at one point or another. This is a great time to teach kids money skills on how to set financial goals and learn how to save money.
4. How To Give Away Money
Last but not least, teach kids money skills to do with charity. The first lesson should be about sharing things that they have with others. Later on, you could slowly expose them to worthy causes and ask if they would be willing to sacrifice a small portion of their allowance to support these causes.
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