I am pleased to announce that my wife, Katie, and I are expecting. Our baby is due at the end of August or the beginning of September, depending on when he/she decides to come out. After a period of excitement and getting a little plan in place, I thought as to how I would teach this child the value of a dollar and how to use it effectively. I did some research and have found a few ways to accomplish this.
Give them a piggy bank
Have them deposit money into this piggy bank. Open this bank once a month or so to see how much they have. This will show how savings will add up over time and will also teach them a simple way to keep records.
Match their savings
Another great way to encourage savings is to match the amount they save into this piggy bank. This will give them incentive to deposit more than they spend, and will thus, increase the amount saved.
Having the child establish a goal is another great way to encourage savings. If he/she would like a certain toy, tell them to save, and watch their savings rate increase!
Let them withdraw and spend their savings
Not letting them withdraw what they have saved will discourage savings, and make them think, “Why save if I can’t spend?” Let them withdraw their money and spend it on what they want. After they spend their money, have a conversation as to why they spent it and why they chose to spend it on x. This will help teach responsible spending and help them differentiate between needs and wants.
Take them to the bank
Taking them to the bank with you is an important step. Let them communicate as much as possible with the teller so they learn the meaning of the transaction and where money comes from. Some banks and credit unions also have free courses for children to help teach about money.
Let them help pay bills
Let them assist in paying bills will show them where your money goes. Explain what you are paying and what each bill means. Utilities pay for the lights and the heat in the house, the cable pays for the TV show that they like, etc.
Teaching children about money is an ongoing effort, but is very important in raising a responsible and sensible adult.