Financial Lessons Teach Money Management and Value to Kids

By: Robert Katz

In today's economy it is very important to know how to manage your money. Children are a very large reason, for why having a budget is so important. Yet, parents use terms like chores and allowance as an excuse to give their kids the money or things they want. Kids that grow up being handed everything and anything they want doesn't prepare them with a value of money or concept of how to manage their finances. Chores should be established as a job that needs to be done as a member of the household and their allowance is their wage paid based on completion and quality of their job.

Teaching the value of a dollar to a kid is about showing them the relationship between the amount of work they had to do in order to get whatever it is that they want. Eventually they will gain a concept of money's value and learn that it requires hard work and saving to earn the things you want. The idea of saving is one of the hardest things to teach a child, but getting them to think about the long term is essential. Opening up a bank account for your children is a good way to teach them to save a portion of what they earn. Matching an amount that your kid saves is a good way to reinforce the value of saving. Be careful using money as a positive reinforcement to often or else they may lose all intrinsic motivation and value in working hard and just focus on completing the task in order to get the extrinsic monetary reward. The same goes with rewarding good grades in school with money, so try to change it up sometimes by giving pressents, going to the movies, or out to their favorite restaurant. Also, make sure the reward fits the amount of hard work they put in, not on the grade they receive.

When I as 12 my parents opened up a checking and savings account for me to help me save all the money I was given for my BarMitzvah. Yet, they didn't put any restrictions on how much I could spend and went through a large portion of the money very quickly and frivolously. Nevertheless, I learned the value of money and reasons for saving as when I got older my expenses and wants increased exponentially. Teaching kids how to budget and save for the future while hard is a great way to start them on the right path towards financial security when they grow up.

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