Teaching Kids Finances

December 28, 2010

The troubled economy has forced many people to look back and find habits that have hurt their current financial standings. It requires those struggling to make changes in handling money that may have started before money was an issue.

Parents want to keep their children from facing the same types of struggles. Teaching kids finances today helps them with their tomorrow.

The more effort put into the financial education of kids today then the more sound their economic future tomorrow. Make allowance the platform for teaching kids the basics of finances and give kids the tools to learn about taxes, savings and the charitable spirit.

Here is some advice on how to teach your kids about finances.

  • Start with a work based allowance. All kids should begin doing basic chores when they are old enough to understand work. Easy tasks that even toddlers can tackle include making the bed, picking up the room and feeding a pet. Allowance should only begin being paid when kids are able to take on the responsibility of chores that help with the daily running of the home. Allowance needs to be work based because in the world you only get paid when you work.
  • Take out taxes. Nothing shocks the newly employed teenager or adult more than the first paycheck minus the taxes. One third of the allowance should go into a jar for “taxes.” At the end of the quarter or year the whole family should vote on how the taxes should be spent. This will help the kids get a beginning understanding of how the government works.
  • Open a savings account. Tradition teaches that one tenth of all money should be saved, but many experts are saying that as much as twenty-five percent serves to build a more stable future. The kids should deposit one third of their allowance into a savings account that will be used to fund their future (education, home purchase or entrepreneurial endeavor).
  • Give to charity. It has been said that the fastest way to succeed in life is to help others. Let each of the kids find a charity that they want to help and then give one tenth of the allowance to charity.
  • Giving an allowance only begins the process of teaching kids about finances. It can serve as a platform to set up other tasks or chores so that the kids can earn even more. The allowance can be deposited into a savings account so that kids can see their savings grow and maybe even withdraw some money to purchase something they really want.

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