I’d like to welcome Stacy DeBroff of Mom Central for providing us with today’s guest post. She offers some incredible tips on how parents can set their children on the right financial path!
The economic downturn arrived suddenly, but the effects reverberate through all aspects of our lives, from what groceries we buy to how we plan to spend our summer. New budgets have also affected the relationship that our kids have with money, and discussing finances with our children has become more 
important than ever. One of the best ways to help our children understand recent changes in our family spending and help them learn to manage their own money is by teaching them the value of savings.
Giving your child an allowance provides a basis for teaching him how to manage money. Even if your child only receives a very small amount each week, or if he must complete chores in order to earn money, having something of his own will enable him to learn lessons about saving money, spending it, understanding the value of things, and even giving to charity. To start, decide on an allowance amount, using your child’s age or year in school as a guide. (For example, 50 cents or $1 per year of his age, or $3 for a 3rd grader.) You might want to give your child enough money so that he can spend some right away if he chooses and save some for special things.
After you’ve established an amount, discuss with your child how to allocate his allowance money. Let him know of any restrictions you have placed on types of toys or treats permitted in the house, but, beyond that, allow him to make decisions about spending on his own so that he can learn the consequences. Having discretion will teach him the value of making good decision. He may opt to buy a toy he sees in the aisle of the grocery store now rather than waiting to save up enough for the game he really wanted, but he might regret it later! While simply making your child save all of his money can be tempting, it’s important to allow him to use trial and error to learn about money management and the benefits of saving.
You can also encourage saving and smart money habits by providing incentives, such as offering to pay interest on the money your child saves during a year or paying him half of the money saved when he clips coupons. Check with local banks about children’s programs and open a savings account for him, or show him the rewards that come with saving by having everyone in the family throw spare change into a jar, which will be saved up and used to for a movie or pizza once a month.
Finally, you should always keep talking to your child about money. These days, with the economy, conversations might revolve around cutbacks you’re making at home or trade-offs when it comes to summer trips and activities, but whatever you talk about will provide valuable lessons. Involving your child in the discussion will get him thinking about money and help him to feel invested in your family’s decisions. Better yet, the lessons he learns now will serve him later in life as he manages his own finances and builds his savings.
Stacy DeBroff is founder and CEO of Mom Central, a company devoted to providing pragmatic tips and savvy advice to strengthen busy families and enhance the home environment.
Filed under:
Frugal Tips, Guest Posts
