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For years, parents across the nation have asked me what are some ideas to help their children understand money. Parents always want their children to have it better than they did; this is a legacy all parents wish for their own. Sometimes, this wish is what hurts their children the most. You need to wish the best for them but teach them to respect money and teach them how to save as well as spend money.
It is OK to give your kids what they want but if that means you go without getting a new winter jacket so your child can have a new bike, then share that with them. Children need to understand the consequence of spending money. It does not grow on trees but when parents consistently give them money the children don't realize it may be coming from vacation money or money to pay off a credit card. There are three things that parents can do to help their children understand money:
1. Allow the kids to make choices
If your child wants a new bike for their birthday and they also want a huge birthday party, what do you do? You tell your child the truth, that you only have enough money to either get them the bike or have a huge birthday party. Then, allow them to tell you which one they want the most. This allows the child to decide what they want most.
2. Give them a dollar limit for holiday or birthday presents
Many times children do not understand there is a limit to the amount of money they can spend. If you know you can spend $100 for each child for their presents then allow them to choose the items they want. Many children differ in the gifts or amount of gifts they want. One child may want a $100 pair of Nike Air basketball shoes while another child may want to buy a couple books, a new telephone, some CD's, and some other knick knacks for $100. Allow the child to decide, this gives them a spending limit, allows them to see the cost of the items they want, and gives them a chance to make decisions. The best way to accomplish this is to make a gift certificate that says the dollars amount and the day and time you will take the child shopping for their present.
3. Talk to them about money
Whether you are wealthy, middle class, or just making it, kids need to know about money. Talk to them about purchases for the house such as a new TV, VCR, or remodeling. Discuss your budget or lack of one and how much things cost. This does not imply that you are poor but gives the kids the necessary skills they need when they move out on their own.
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