- Teaching Money Management Skills -
Personal Money Management Systems for Kids
Teaching money management skills to children is possible
if you teach them the basics of money management and match the money management system with their
cognitive ability.
Family money management tips you can use for teaching personal money management to children include never loaning money
and being a good role model. Children cannot learn effective personal money management skills if they never see them in action.
Dad Gives Terrible Financial Advice
A young college co-ed came running in tears to her father.
"Dad, when you told me to put my money in the bank that was terrible financial advice!
I did just what you said and now that bank is in trouble!"
"What are you talking about? That's one of the largest banks in the country," he said.
"I don't think so" she said, still crying softly.
"I got one of my cheques back and they sent a note saying, 'Insufficient Funds'."
The young woman in the joke doesn't have control over her money. She does not understand the concept of money
or how to manage it. Her perception of a bank is a place that gives you money. It is pretty
obvious she does not
understand the difference between her money and the bank's money!
Not only that but having written an
NSF cheque indicates she has no understanding of how much money she has.
Perhaps the young girl's father spent too much time giving advice and not enough time teaching money management skills!
There are three types of money management systems that you can use to help your children develop an
understanding of money and the skills to manage it.
Visual Systems
This type of money management system helps your child connect to
the physical money such as coins and paper. As a result your child develops a better
understanding of when that money is used and how much is left.
There are two types of these visual systems for personal money
management. One is the money jar system
and the other is the envelope budget system.
Because a visual money management system is a very concrete representation of money and personal finances
it is suitable for very young children (under 10) or for children with organizing challenges such as dyslexia or attention deficit disorder.
Graph Systems
Teaching money management using graph systems can be started sometime after the age of ten.
You can use either a bar graph system or a statistical graph such as the one pictured here.
With this system children do not actually see the money but rather they have a representation of the money in
the graph. The child can graph the money on a regular basis to see the
changes up or down as money is added to or withdrawn from their account.
Using a chalkboard or a "dry erase" system to color in the graph allows the child to be fully involved
in adding to or subtracting from their amounts.
Tabular Format Accounting System
This type of money management system is what you are most familiar with since your own bank statements
are formatted in this way.
Money is represented by dollar amounts and different columns are used for debits and credits.
Teaching money management using this type of system is only good for children who are old enough to
understand what the figures on the page mean. Most children will need to be about 12 or older to get this.
Using a tabular accounting money management system works better when the child has progressed from the other two
systems and already has an understanding of the basics of money management.
Money Management Tips for Teaching Children About Money
- Borrowing money should not be allowed. This is the only way to assist children to fully understand the
difference between their money and your money. Every time you disperse
money to your child it should be either a payment or a withdrawal - NEVER a loan.
- Kids cannot learn how to manage money if they never have the responsibility of having money.
Your child will go to where the money is and if
that is the "Bank of Mom and Dad" then why would they go elsewhere - even as an adult?
Teaching money management skills to your children helps not only them but it could
certainly benefit you as well!
- Children need to build their money management skills on the
basics of money management.
So make sure that your own attitudes, values, and beliefs about money present a good role model for your children.
- Do not pay children for doing household chores and tasks. This should be an expected responsibility they take on
as part of the household and is the only way to teach children self reliance.
Children should not do chores because they get paid - they should do them
because they are a contributing member of the family and they have duties and obligations in that role (as we all do).
Teaching money management skills to your children requires that you have a good foundation in the basics of money management,
that you provide a good role model for your kids, and that you fully understand how to control your own money.
No matter how much energy you
invest in formal teaching your child will still learn more from watching you than from any formal instruction!
Stumble It!