As soon as children can count, introduce them to money. Take an active role in providing them with information. Observation and repetition are two important ways children learn.
Communicate with children as they grow about your values concerning money — how to save it, how to make it grow, and most importantly, how to spend it wisely.
Help children learn the differences between needs, wants, and wishes. This will prepare them for making good spending decisions in the future.
Setting goals is fundamental to learning the value of money and saving. Young or old, people rarely reach goals they haven’t set. Every toy desired should become the object of a goal-setting session. Such goal-setting helps children learn to become responsible for themselves.
Introduce children to the value of saving versus spending. Explain and demonstrate the concept of earning interest income on savings. Consider paying interest on money children save at home; children can help calculate the interest and see how fast money accumulates through the power of compound interest. Later on, they also will realize that the quickest way to a good credit rating is a history of regular, successful savings. Some parents even offer to match what children save on their own.
Keeping good records of money saved, invested, or spent is another important skill young people must learn. To make it easy, use 12 envelopes, 1 for each month, with a larger envelope to hold all the envelopes for the year. Establish this system for each child. Encourage children to place receipts from all purchases in the envelopes and keep notes on what they do with their money.
With teenagers, it’s also useful to discuss what’s happening with the national and local economies, how to economize at home, and alternatives to spending money. All of this information will be important as they take on more responsibility for their own financial well-being.