Despite how many years children spend in school, most children are not taught about how to budget money, which is ironic since the ability to manage money is an essential life skill. Many well-meaning parents and teachers appear to overlook this essential lesson, despite teaching children almost everything else they can about how to deal with life when they grow up.
When it comes to teaching children about money there are seven essential principles children should learn.
- They should start learning about money at an early age. Shielding children from money does them a disservice.
- Children should learn how to be sensible consumers. This is a formidable task since children are the ultimate impulse buyers, but this is a lesson that will take them far in life.
- Children should learn how to enjoy saving up for future purchases. Buying something expensive and useful from money earned and saved teaches a child a profound lesson about the value of money.
- Children should learn how to start saving early and for a long time so that their money begins to earn compound interest well into their adult years. If this is done, the child has a good chance of becoming a millionaire well before the usual age of retirement. Instead of working all their lives, the way most people do, people who are taught this money habit will be free to spend many wonderful years doing the things they love.
- Children should learn how to avoid wasting money and how to make good use of the things that they do buy. Often people buy things on an impulse that over the years becomes nothing more than clutter. This habit can be nipped in the bud in early childhood.
- Children should learn how to shop wisely. Imagine how much money can be saved over the years by learning how to buy things when they are at their lowest price.
- Children should be taught to take personal responsibility for everything that they do. This lesson goes beyond money management. It can have a beneficial influence in every aspect of their lives.
Teaching different age groups
Parents should teach money skills until they become second nature and set a personal example.
6 to 12-year-olds
Younger children need to learn the relationship between money and work. They often do not see this relationship and even believe that money comes straight from the ATM machine and all a parent has to do to get money that they need is go to the machine. One way a parent can show a young child that money is the result of services rendered is to create a payment system based on chores.
Once children learn how to earn money, the next lesson is learning how to save, share and spend it. Elmo, the Muppet on Sesame Street, has an interesting lesson called “the three jars.” This is an excellent way to allocate money for saving, sharing and spending.
Teenagers should be taught a number of financial skills, including how to
- Itemize their regular expenses
- Account for all their income
- Subtract income from expenses
- How to save extra income
Teaching children about how to budget is like teaching them any life skill. Teaching should occur at the level that they can comprehend. Moreover, as children grow up, the sophistication of their money lessons can be increased. Curiously enough, not teaching children about how to manage money is common through different demographic and social groups in both developed and undeveloped countries. The result of this lapse in education is fairly obvious in everyday life because many adults, who appear to be quite capable in most things, live well above their means and are constantly try to figure out how to make ends meet. Imagine how different things would have been, if a thoughtful parent or kindly teacher had taken them aside and taught them how to manage their money.