Teaching Your Children the Value of a Dollar
by David Sung
Summer break is just around the corner, and what better way to keep you children busy this summer than by encouraging them to make some money and learn about business?
The Fair Labor Standards Act limits the number of hours that a minor under the age of 16 can work and sets 14 as the minimum age for employment. But, that doesn’t mean your kids should wait until they are 14 years old to start learning about earning and saving money.
One of the best things you can do to get your child started on a solid financial footing is to start teaching them at a young age. In an earlier blog post, Public Finance in Schools, we discussed how public high schools are making great strides towards teaching financial literacy by creating and implementing mandatory personal finance courses and tests to ensure our students are equipped to make smart financial decisions. Learning about personal finance in school is a good step, however, there are ways outside of the classroom you can help your child develop their financial skills and improve the likelihood of them having a sound financial future.
The Reward System: Earning and Saving
Before your children are old enough to start handling money, you can get them thinking about tradeoffs by teaching them about opportunity costs and earning. Instead of giving your child money, you can develop a points system that your child can redeem for a prize. Primary school teachers typically use a similar system in the classroom, where children receive gold stars for good behavior that can later be traded for candy or an extra afternoon on the playground.
You can use a similar points system at home to reinforce their points system at school. For example, if your child wants a new toy or videogame, let them earn it. Explain to your child that if they really want their reward, they can put in some work around the house and earn it by reaching a certain number of points for chores, such as doing the dishes or vacuuming. Once they have done enough chores to rack up the agreed-upon number of points, they may redeem them for their reward. It is best to have multiple rewards your child can choose from ranging from low to medium cost items – candy to video games, for example. Giving them a range of rewards to choose from will teach your child about opportunity costs, trade-offs, setting goals, and saving.
Teaching your children to save money is important. Of course, it’s not the easiest thing to do even when you are an adult. But, if your children can master savings at an early age, it will help them become better money-savers in the future.
A child meltdown in the toy section of a store is a parent’s worst nightmare. Instead of just buying them the new toy on the spot, you can tell them they can save up their allowance until they can afford to buy it. It is always better to talk with your child about this before you go shopping in a public place to avoid a fit or temper tantrum, like we’ve seen so many times while shopping. This tactic will not only help your child learn about savings, but it also might make them think twice before asking you to buy them something every time you take them shopping.
Product Research and Savings
Since the dawn of the Internet, consumers have been going online to find information on products and services and find the best price possible. When your child asks if you can buy them something, ask them to research the item on the Internet and present you with some product research and pricing. If your child wants a pet, let them do the work! Have them do extensive research on the animal so that they know everything about it and the care it requires, complete with a presentation to you. This will connect them to the pet before they even pick one and insulate you from picking up the pet chores around the house, because your child will know exactly what they’re getting into.
What money saving tools have you equipped your children with? Share them with us in the comments.
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