Even adults don’t always manage to set aside some money from their paychecks, follow a financial regimen, or learn the principles of investing. Explaining all of this to a child is even more challenging. To make it easier for him to get the hang of it, you can present knowledge in the form of a game.
A person who has been taught the skill of managing their own funds as a child will feel at ease in today’s society. Here’s where to start.
First tell where money comes from in the first place. It should be explained that their receipt is the result of the parents’ labor. The example of using children’s toys will be understandable. First count how much you earn per hour. Then explain to your child that Dad and Mom will need to work for three hours each to buy this toy. You will have to leave your son or daughter for three hours to bring the desired item home later.
This way you understand that money is never just given. To work less, but get more, you need to set the funds in the right direction and start investing, for example using the financial market Forex.
A child who is in first grade can be told how to keep money in the bank and make money from it. Create a “home bank” to save a certain amount and spend it to buy toys or pay for favorite activities. Buy a large piggy bank and “appoint” your son or daughter as a banker.
Refill the “bank” can be a child saving up from pocket money, and parents (for example, you can send to the piggy bank change collected at the end of the week).
At the same time, teach your child to make choices: discuss in advance whether the money you saved will be spent on buying sweets, going to the movies, or on amusement rides.
Children as young as eight years old can be introduced to investing. Tell them that the amount of money they already have can grow if they use it correctly. When teaching your child the basics of financial literacy, be sure to explain that investing involves risk, so you are unlikely to get everything all at once.
Tell them that money grows gradually, and help the process of compound interest, accruing both on the original amount, and on the funds already accrued. Bottom line – the earlier you start investing, the more time the money will have to grow.
Principles of Education
To teach your child how to handle money properly:
- Give him pocket money. As early as 6 or 7 years old, children should be allocated small amounts for small expenses.
Teach to count expenses. For example, let the child fill in a table with income and expenses. This helps to feel responsibility for financial decisions, to handle money wisely and to understand that you have to spend wisely.
- Let your child earn his or her own money. Parents can be their first employers. Set up small payments for chores or simple errands. Young children can help with household chores, walk the pet, go to the store to get bread, etc. The child will be rewarded for their efforts, feeling independent and confident in their abilities.
- Allow for mistakes. Do not criticize children for unnecessary spending – so you only instill unnecessary fears. A child is concerned that he made a useless purchase, and you can sympathize with him. Mistakes bring people valuable experience and make them think next time, before you spend something.
- Give a feel for how money works in adulthood. Let the child practice by interacting with salespeople, cashiers, or waiters. He can pay for his own purchases at the cash register, count the change, order at the cafe, pay the bill, and decide whether or not to leave a tip for the staff.
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